Heritage Oil set for big time
siliconinvestor.com
Created:
5 May 2009
Written by:
Daniel O'Sullivan
Last year was transformative for FTSE 250 oil explorer Heritage Oil. Since listing in London in March, discoveries across the prolific exploration licences in Uganda, its joint-ventures with Tullow Oil crossed the threshold for commercial development. The recent significant strike on the Buffalo-Giraffe prospect alone promises 350m barrels of gross recoverable oil and also significantly de-risks other prospects in the same area.
Since the year-end, meanwhile, the group's Miran exploration well in the autonomous Kurdistan region of northern Iraq hit a notably large and apparently productive oil-bearing interval, with an ongoing well test expected to produce some impressive figures. Also, post-balance sheet date, the company has raised $28m (£19m) from the sale of its Omani interests - 2008 production from this source and also the company's small Russian operation was minimal in any case. Heritage knows it will have to raise fresh funds for its share of pending development costs in Uganda, but has already been approached by several parties with regard to a farm-in deal on this project.
Credit Suisse is forecasting an 11¢ loss per share for 2009.
HERITAGE OIL (HOIL)
ORD PRICE: 398p MARKET VALUE: £1,015m
TOUCH: 392-398p 12-MONTH HIGH: 410p LOW: 135p
DIVIDEND YIELD: nil PE RATIO: na
NET ASSET VALUE: 64¢ * NET DEBT: 56%
Year to 31 Dec Turnover ($m) Pre-tax profit ($m) Earnings per share (¢) Dividend per share (¢)
2007 3.71 -83.2 -37 nil
2008 5.10 -41.3 -16 nil
% change +37 - - -
£1=$1.49 *Includes intangible assets of $211m, or 83¢ a share
TIP UPDATE
GoodValue
Shares in Heritage Oil have more than doubled since we recommended buying them last autumn (181p, 22 October 2008). While gains of that magnitude invite some profit taking, those already invested should definitely wait until the Miran well test result is released, as this should be the catalyst for more short-term upside. For the longer term, the promise of Uganda and Kurdistan prospects mean that the shares should maintain their recent outperformance. Good value. |
