The carnage caused by falling oil prices is really quite shocking. It’s bad enough for the big players like BP and Shell, who have seen their share prices falling since the summer — but when I took a look at the biggest fallers in the FTSE 350 over the past month, the worst of the worst were all small oilies.
Afren (LSE: AFR) is being hit the hardest, with its shares down 53% in the past month to 37p, taking them down a massive 78% over 12 months.
Scandal
Afren has been dogged by the dismissal of its CEO, COO and two other directors for gross misconduct after they were caught with their hands in the till, but has the backlash from that been overdone? Even with low oil prices leading analysts to forecast a 60% fall in EPS this year followed by a further 25% next, Afren is still profitable and its shares are now on a forward P/E of under 4!
Even without any management scandals, EnQuest (LSE: ENQ) is also on a rock-bottom forward P/E of 5.5 based on this year’s forecast for a 57% fall in EPS and rising only as far as 8 for 2015’s extra mooted drop of 31%. That’s after a price crash that has seen the UK-based explorer’s shares lose 46% in the past 12 months to 36.7p, with a 73% loss over 12 months.
Forecasts stale?
As with Afren, the most recent oil price dips won’t have been factored into consensus forecasts just yet, but EnQuest is also profitable and there could well be a bit of a safety cushion for those buying at today’s low valuation.
Ophir Energy (LSE: OPHR) doesn’t have the luxury of profitability of the other two — it’s been loss-making for a few years, and though there’s a positive EPS forecast for this year, analysts have it turning negative again in 2015.
But the upside for Ophir is that it has the cash to keep going, and has recently exploited low valuations in its takeover of Salamander Energy (whose share price has dropped 47% in a year). That hasn’t prevented a share price plunge, mind — Ophir is down 36% in the past month to 117p, and down 61% over 12 months.
Time to buy?
Are any of these three looking like bargains now? Well, once oil prices have started to stabilize and City forecasts adjust and settle down a bit, I think we’ll still be seeing very low P/E ratios for a couple of profitable companies (and for one with attractive potential). We could well be looking at attractive possibilities for the brave right now.