Cairn Energy
Despite today’s results from Cairn Energy (LSE: CNE) showing that the company was able to narrow its loss in 2014 to $559m (from over $1bn in 2013), its shares are still down by 6% at the time of writing. That’s at least partly because the outlook for the company remains highly uncertain, with a lower oil price having the potential to cause further impairments to its assets and meaning that its revenue (when it does commence at a reasonable level) could be lower than had previously been forecast.
In fact, the outlook for Cairn Energy remains rather disappointing. Certainly, it has the potential to unlock significant shareholder value from potentially world class assets but, in the meantime, it is expected to remain heavily in the red. For example, it is expected to post losses of £70m this year, and £83m next year and this means that investor sentiment could continue to weaken. As such, now does not appear to be the perfect time to buy a slice of it.
Rockhopper Exploration
The key driver of Rockhopper’s (LSE: RKH) share price moving forward is likely to be the outcome of the drilling programme in the Falkland Islands. And, as recent news flow has shown, encouraging progress is being made, with the Zebedee exploration well (in which Rockhopper has a 24% stake) being spudded.
Looking ahead, Rockhopper estimates that the Zebedee well’s tests of seven stacked fan bodies will have success rates of between 9% and 52%, with the well targeting around 280m barrels of oil equivalent, of which around 67m would belong to Rockhopper.
Clearly, Rockhopper remains a relatively risky play and, should the results of the drilling programme disappoint, then its share price could come under considerable pressure. However, it seems to have considerable future prospects and, backed by sound finances, could prove to be a profitable investment for the medium to long term.
BG
Shares in BG (LSE: BG) (NASDAQOTH: BRGYY.US) have fallen by 6% in the last month, as the company continues to look relatively overvalued given its future prospects. Certainly, BG has a number of high quality assets and, while a low oil price will hurt it in the short run, it has the resources and management team to turn things around. However, the problem for investors is that much of this turnaround potential appears to already be priced in.
For example, BG trades on a price to earnings (P/E) ratio of 31.4 which, when you consider that its bottom line is forecast to fall by 65% this year, seems rather expensive. Furthermore, even though its shares have fallen by 20% in the last year, they still yield just 2.2%. As such, BG does not appear to be an attractive stock at the present time.
Amerisur
Shares in Amerisur (LSE: AMER) have been hit very hard by the falling oil price, with them plunging by 50% in the last year. However, the impact over the medium term on the company’s bottom line is not expected to be so extreme. For example, Amerisur is forecast to increase earnings by 25% in 2014 and, while they are due to fall by 65% in the current year, growth of 200% next year means that the company’s bottom line is still set to be in good shape over the next couple of years.
Furthermore, when you consider that Amerisur trades on a price to growth (PEG) ratio of just 0.1, it seems to offer a considerable margin of safety so that, even if its planned comeback in 2016 is less successful than currently hoped for, it could still prove to be a profitable, albeit volatile, investment.