Join our community of smart investors

Faroe books a net profit

Despite ending June in an underlift position, the North Sea stalwart's half-year bottom line was black
September 19, 2018

Ahead of half-year results, there was little investors in Faroe Petroleum (FPM) had not already been briefed on. Production figures, operating costs, a resource upgrade from the Iris Hades discovery, the £9m increase in net cash and six of the seven near-term exploration and appraisal wells were all previewed in last month's operational update.

IC TIP: Hold at 155p

Interim numbers therefore provided just one main revelation – a significant underlift position at the end of June – which meant £37.3m-worth of produced oil and gas had not been booked as sales in the period. That explains the fall in the top-line and operating cash flow, though the second-half weighting of this year’s £225m capital expenditure programme is fully funded by post-period sales, and a balance sheet propped up by £40.4m booked from the Fenja stake disposal.

This active approach to portfolio management has worked well for Faroe. So despite looming costs for the Brasse development and a busy exploration programme, management has one eye on M&A, even if chief executive Graham Stewart acknowledges that hot competition for assets might make bilateral asset swaps more feasible.

On average, analysts expect adjusted earnings per share of 8.3p this year, and 7.95p in 2019.

FAROE PETROLEUM (FPM)  
ORD PRICE:155pMARKET VALUE:£ 577m
TOUCH:154.2-155p12-MONTH HIGH:159pLOW: 89p
DIVIDEND YIELD:NILPE RATIO:17
NET ASSET VALUE:73p*NET CASH:£83.9m**
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201780.1-6.1-0.80nil
201867.873.011.5nil
% change-15---
Ex-div:n/a   
Payment:n/a   
*Includes intangible assets of £120m, or 32p a share. **Excludes £54m of financial liabilities including Norway exploration financing facility