Results round-up

Faroe Petroleum's assets are worth up to $1bn, according to an independent valuation published on Wednesday.

Faroe, which has received a cash offer from Norwegian oil producer DNO of 152p per share, reported that Gaffney, Cline & Associates had valued the company's oil and gas assets in the range of $879-$1,076m at current oil prices. This would imply a valuation for Faroe of 186-225p per share on a fully diluted basis, adjusting for net cash as at 30 September.

Gaffney, Cline estimated Faroe's proved and probable reserves as at 30 September 2018 to be roughly 102m barrels of oil equivalent.

John Bentley, Faroe's non-executive chairman, pointed out that the valuation represents a 22%-48% premium to DNO's offer price, which the Norwegian firm had urged Faroe shareholders to accept last week.

"GCA's independent valuation clearly supports our view that DNO's offer substantially undervalues Faroe," he said.

In a statement last Thursday, DNO said that if it does not receive sufficient acceptances for its offer to be unconditional, it will choose to either lapse the offer or extend it. If the offer is lapsed, DNO won’t be able to make a new offer for another 12 months.

Also on Wednesday, Faroe reported that an exploration well and an appraisal sidetrack at its Brasse East asset in the northern North Sea, where it has a 50% working interest and is operator, encountered 48 metres of gross Jurassic reservoir with excellent properties, but was found to be water wet. Data acquisition was undertaken including coring and logging.

Analysis of the appraisal well sidetrack indicates the well encountered approximately 40 metres of gross hydrocarbon-bearing Jurassic reservoir.

Further wireline logging is ongoing which will be incorporated into the final well results.

Graham Stewart, chief executive, said: "Although no hydrocarbons were present in the Brasse East prospect we are pleased with the results of the appraisal sidetrack which confirms hydrocarbons within the northern part of the Brasse field, as expected. In addition, the excellent sand quality in the Brasse East Exploration well has reduced the reservoir risk of the Brasse Extension exploration prospect located to the north east of the Brasse field."

Ophir Energy said it has been approached by Indonesian oil and gas company PT Medco Energi about a potential takeover.

The boards of the two companies were in talks about a possible cash offer for Ophir, which has seen its shares fall almost 90% over the past five years.

A deadline of 28 January has been set for Medco to confirm it is making an offer or to walk away.

Shares in Ophir jumped 37% to 49p in early trading on Wednesday.

The company, which was founded in 2004, listed in London in 2011 and spent five years in the FTSE 250 before the limping share price led to it dropping out of the mid-cap index in 2016.

After years working to develop the Fortuna natural gas discovery offshore Equatorial Guinea, chief executive Nick Cooper stepped down earlier this year, with non-executive director Alan Booth taking over in an interim executive appointment.

The Fortuna development has been hampered by a lack of funding and a loss of key partners, with industry giant Schlumberger pulling out in May.

But in September, Ophir completed the acquisition of producing assets in south-east Asia from Santos and said it will "significantly downsize" its presence in London ahead of its transitioning into being an Asia-led firm, which excited some analysts but was not enough to arrest a 47% decline in the shares last year. Peel Hunt had in December stated a 'buy' recommendation and 58p target price, while UBS had an 80p target price in September, seeing potential for the Santos acquisition to "supercharge" free cash flow.

In early December, a sizeable gas discovery was unearthed in the Sampang production sharing contract, part of the Santos acquisition, with a development plan to be submitted in coming months. The company also said the initial stages of the final phase of the Bualuang development in the Gulf of Thailand had gone well, with the programme delivered on time and under budget.

Analyst Mark Wilson at Jefferies said the Medco discussions "should not come as a surprise", noting Booth's comments that "you build a business that's valuable, so it becomes valuable for the trade".

Wilson said he believes a valuation in line with his core net asset value per share of 52p "could be achievable", citing less conviction as to the strategic value of Ophir in contrast to, for example, Faroe Petroleum's strategic value to DNO.

Russ Mould at AJ Bell said that with Ophir Energy trading at just a fraction of the market value it enjoyed in the early 2010s it is "perhaps unsurprising" a potential cash bid has emerged.

“How generous its Indonesian suitor Medco is prepared to be is open to question. With oil prices still volatile, any deal could flounder over a lack of agreement on what represents a fair value for the business."

Mould said the pivot towards producing assets in South East Asia "has been only partly successful and, should a firm takeover offer materialise, long-suffering shareholders may welcome an opportunity to realise some value from their investment".