Ophir Energy PLC

About Ophir energy

Ophir Energy plc is an independent Upstream oil and gas exploration and production company focused on Africa and Asia.

The company has been under-performing for a number of years. Management has not been good and as with many companies promises to change.

As part of cost cutting OPHR is moving its head office from London to Asia. The cost of relocation is approximately $10 mill.

Share price

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Operations and Trading Update – 15 Jan 2019

The trading update shows promise with improvements across the board. The company has hedged oil prices and here is the statement:


The company has two oil price hedges in place for 2019: for the period to 6 September 2019, the company sold a Brent swap at approximately $70 per barrel and purchased a Brent call at approximately $78 per barrel for 2,000 bpd; and for the full calendar year 2019, the company sold a Brent swap at approximately $56 per barrel and purchased a Brent call at approximately $66 per barrel for 2,000 bpd.

Quote from OPHR trading statement.

LEM back of envelope calculations

Based on information presented in the 15 Jan 2019 Trading update, here is a back of envelope estimate of value.

itemvalueunit
daily production29,700boepd
price of oil51us$
selling price @ 80%40.8us$
daily gross revenue1,211,760us$ / day
assumed days in year350days
yearly gross revenue424,116,000us$
capex122,000,000us$
op ex @ 16$166,320,000us$
net profit135,796,000us$
market cap £315,000,000gbp
fx1.3usd/gbp
market cap $409,500,000us$
RoE33%

Here is a scenario table with the same calculation as above buy varying the oil price:

The current market cap is based on a share price of 45 pence. On this basis one may expect the fair value to be significantly above the current level.

The recent bid by PT Medco Energi Global PTE Ltd for OPHR was 48.5p

This was rejected. It is expected that 60p per share may have been an acceptable starting point based on the above data. This would have left significant value for the buyer and an acceptable exit for current shareholders.

Conclusion

Buy or hold OPHR and await further progress updates or a new improved bid.

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