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Fat of the Eland

The Niger Delta-based group's production is currently attracting a premium price to Brent
April 18, 2018

For Eland Oil & Gas (ELA) chief executive George Maxwell, 2017 was the most successful year in the Nigerian-focused group’s history. The driver – as followers will be aware – was the OML 40 field, Eland’s principal asset and producer of 18,500 barrels of oil per day (bopd) by the end of 2017.

IC TIP: Buy at 84p

That’s not bad from a standing start, although this ramp-up requires a few caveats. First, Eland’s exposure to this resource is based on its 45 per cent shareholding in Elcrest, which itself owns a 45 per cent stake in OML 40. Second, output was heavily weighted to the second half, following the reopening of the Forcados terminal in May.

As such, the numbers in the table below reflect the 3,934bopd average net to Elcrest, and an average sales price of $51 (£36) a barrel – which owing to the timing of liftings was 6 per cent down on the median Brent price for the year. In 2018, the Forcados blend has been selling at a premium to an already elevated international benchmark.

Free of hedges, and with OML 40 on track for 30,000bopd gross by the middle of this year, Eland and its analysts are guiding for a step-change in cash flows. However, drilling at the Ubima field, where maiden output is anticipated in 2018, looks set to delay any move to the dividend list. Consensus forecasts are for adjusted pre-tax profit of $118m and EPS of 42.5¢ for 2018, and $176m and 38.3¢ in 2019.

ELAND OIL & GAS (ELA)  
ORD PRICE:84pMARKET VALUE:£185m
TOUCH:83-84p12-MONTH HIGH:91pLOW: 47p
DIVIDEND YIELD:nilPE RATIO:20
NET ASSET VALUE:76¢NET CASH:$11.3m
Year to 31 DecTurnover ($m)   Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2013nil-25.81.0nil
201411.7-16.97.0nil
201518.1-9.5713.0nil
20162.37-31.49.0nil
201768.9-15.66.0nil
% change+2804--33-
Ex-div:na   
Payment:na   
£1=$1.42