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Aberdeen firm making 'significant progress'

Parkmead seeks acquisitions via low oil price

Tom CrossFormer Dana Petroleum oil baron Tom Cross has his sights set on snapping up assets which have been coming on to the market following the price slump.

Oil minnow Parkmead Group, which he now chairs, says it is well-positioned to take advantage of the low price to seek out further acquisitions.

Since the price dropped from $110 to around $50-$60 a barrel, companies have been trimming their portfolios, with Sir Ian Wood saying recently that “a very large number of North Sea assets are up for sale.”

Cross said today the company had made significant progress and had discovered a new onshore gas field at Diever West, in the Netherlands, which delivered “excellent production flow rates”.

This, he said, is providing an additional near-term cash flow opportunity to the group.

“The company expects to treble its net gas production in the Netherlands through a low-cost work programme during 2015. This will act as a natural hedge to the low oil price environment.”

Total assets at the half-way stage grew by 34% to £109.6 million at 31 December 2014 (2013: £81.5m).  Revenue increased to £10.1m (2013: £9.9m). The firm has a strong cash position of £39.4m.

Parkmead, based in Aberdeen, recorded a post-tax loss (excluding impairment) of £2m on revenues of £10.1m (2013: £9.9m).

Analyst reaction:

Numis: (Buy, TP: 189p) Looking for opportunities

Parkmead’s half year results reflect ongoing activity at the company’s core producing asset, Athena. Production for the period was 1.85kboed with 1.6kboed coming from Athena. Per barrel costs at Athena remain in the mid-60’s but are expected to come down after contract revisions with BW Offshore and service providers. Cash burn during Athena well operations was higher than forecast but production appears to have stabilised with three fully operational wells from two. Parkmead retains a healthy balance sheet with £39.4m of cash and total assets of £109.6m. The company has taken a non-cash impairment of £12.9m relating to Athena, which remains a marginal field in our view at current oil prices and vessel rates. Excluding impairment the group reported a post-tax loss of £2m. Financial performance remains highly levered to Athena production rates, operational costs and oil price in the short term. We stress that the bulk of our valuation is driven by the PDL development rather than current production.

Our NAV drops to 253p/share and target price from 210p/share to 190p/share as we adjust for UKCS tax changes, Athena costs and production, reported cash and Diever West.

Charles Stanley Securities: (Buy, TP: 284p)

Parkmead’s interim results show that the company’s capital discipline has translated into a robust financial position. The company’s cash balance net of debt amounted to £37.4 million ($53.4 million) at the period end. We have used the interim results announcement as an opportunity to lower our long-term Brent crude oil price estimate to $70 per barrel, escalated at 2% p.a. (from $85 per barrel) and to update our valuation model, as a result of which we are revising our valuation and target price to 284 p/share (from 347 p/share).

We estimate that at the current time the value of Parkmead has never been greater for any given crude oil price assumption.

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