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Ophir Energy's financing frustration

A final investment decision for the Fortuna LNG project continues to slip
Ophir Energy's financing frustration

Remedial efforts are helping Ophir Energy (OPHR) to “approach sustainability”, in the words of chief executive Nick Cooper. That follows a comment that the mid-tier oil and gas outfit “has reached financial stability” in January. If this all sounds defensive, it’s for good reason. While reserves and liquidity both increased in 2017, the year did not result in a final investment decision on the Fortuna LNG project.

IC TIP: Hold at 51.7p

It still hasn’t, and full-year results provided no further detail on one crucial detail: who will provide the finance. In December, we learned that Ophir and its consortium partners had elected to receive up to $1.2bn (£863m) of funding from a “leading Asian bank” on similar commercial terms to those agreed earlier in the year with three Chinese financing groups.

That remains the priority, and is set to hoover up $55m of this year’s $150m capital expenditure budget. That outlay means that, without clarity on Fortuna, operations are just about sustainable. Together, a hedging programme and a $90m forecast income contribution from production should leave Ophir in a net cash position come December, although it’s worth recalling that Ophir started 2017 with net cash at $160m.

The City expects a pre-tax profit of $24.6m and an adjusted loss per share of 1.5¢ this year, compared with losses of $52.4m and 12.4¢ in 2017.

OPHIR ENERGY (OPHR)  
ORD PRICE:52pMARKET VALUE:£ 365m
TOUCH:51.9-52.2p12-MONTH HIGH:94pLOW: 51p
DIVIDEND YIELD:NILPE RATIO:N/A
NET ASSET VALUE:207¢NET CASH:$117m
Year to 31 DecTurnover ($m)   Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2013nil-280-45.0nil
20142889.4nil
2015161-376-47.1nil
2016107-50.1-11.0nil
2017189-64.4-15.8nil
% change+76---
Ex-div:n/a   
Payment:n/a   
£1=$1.39. † A gain of $672m on the income statement was attributable to a farm-out agreement.