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Ophir Energy, hostage to Fortuna

The independent has written off half the value of its major LNG project... and further impairments could follow
September 13, 2018

Any illusions that Ophir Energy (OPHR) might one day see production from its Fortuna development evaporated with the publication of these half-year figures. Although the group still has its licence to the liquefied natural gas project offshore Equatorial Guinea, the asset has been impaired by $310m (£239m) to just $300m. A buyer is sought, although the company admits to "uncertainty around the value we can ultimately realise".

IC TIP: Hold at 38.3p

In other words, there is a good chance the remaining $300m will be written-off by the year end, when Ophir’s licence expires. Following Schlumberger’s withdrawal from the venture, and a lack of funding to date, hopes for a white knight seem overly hopeful; as Ophir states in these figures, "once we reach an outcome, a further impairment may be required".

The latest face-saving push is to double down on production in Southeast Asia, where the company recently acquired a portfolio of cash-generating fields from Santos for a headline consideration of $205m. A strategic update, released with these numbers, also pledges big cuts to the London office and frontier exploration, and a shift in headquarters to Asia.

Prior to the strategic update, consensus forecasts were for adjusted earnings per share of 1¢ this year, and 9¢ in 2019.

OPHIR ENERGY (OPHR)   
ORD PRICE:38.3pMARKET VALUE:£270m
TOUCH:38.2-38.5p12-MONTH HIGH:78pLOW: 36p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:154¢NET CASH:$75.3m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201788.3-45.6-12.0nil
2018102-341-53.1nil
% change+16---
Ex-div:na   
Payment:na   
£1=$1.30