Salamander Energy PLC (SMDR:LSE): Canaccord/ Deutsche Bank
Salamander announces that it has been considering a sale of core assets (Bualuang
oilfield offshore Thailand and Kerendan gas field onshore Indonesia) and has
received preliminary and conditional expressions of interest for all or part of its
interests, plus a small number of preliminary approaches for the company.
A formal sales process will now commence.
Canaccord to take the story on
Our risked Central NAV (value of discovered resources at a 10% discount rate) stands
at 140p/sh. With the stock trading at 134p/sh at the close, it appears a buyer may
have to pay a premium to our NAV at a 10% discount rate to secure a deal.
Running our NAV at a 7% discount rate our Central NAV would rise to 176p/sh. This
might be a more reasonable estimate of potential upside for an acquirer with a lower
cost of capital.
On an unrisked basis (incorporating unrisked value for discoveries under appraisal,
including a discovery offshore Indonesia that might not be developed), this rises to 203p/sh at a 10% discount rate – we view this as a rather speculative measure.
Yesterday’s Heritage deal was a 25% premium to the close and a 35% premium to
the 3-month VWAP. A 25% premium to the close for Salamander would equate to
167p/sh, however, Salamander’s 3-month VWAP stands at 105p/sh and a 35%
premium to this would be 142p/sh. Salamander has risen by some 28% over the last
1.5 weeks.
We note that M&A activity in the E&P sector has risen sharply over recent weeks,
providing broad support to the sector. We would highlight Eland & Afren (Nigeria),
Ithaca, Faroe and Enquest (UK North Sea) Tullow and Premier as companies likely to continue to benefit from this recent increase in M&A activity.
Salamander trades at 96% of our 140p/sh Central NAV at a 10% discount rate, a
premium to the sector at 84%. If we were to use a 7% discount rate Salamander
would be trading at 76% of our Central NAV (which would rise to 176p/sh).
Deutsche Bank …….
Thematically this fits with a recent trend of corporate activity in the
E&P sector aimed at cash-generative producing assets with a lower-risk
growth profile. In our view, given Salamander’s high equity in Bualuang and
Kerendan and the capital investment that lies ahead, reducing exposure and
accelerating value makes strategic sense. We believe asset disposal
discussions may have acted as an overture for discussions around a wider
corporate deal. In our NAV, Bualuang represents c. 140p of asset value while
Kerendan represents c. 45p. Our total risked NAV which includes exploration is
185p. We estimate Salamander trades at 3.0x 2014 EV/DACF, $12/boe (EV/2P)
and $4/boe (EV/2P+2C). |
