As full details of its Humpback well oil prospects are keenly awaited, the share price of Falklands Oil & Gas (LSE: FOGL) has been up and down. The shares scraped 27p mid-September in anticipation of a sizeable find, but they’d dropped back to 24p a month later, and a less-then-exciting update on 15 October sent them down again, to today’s 20.5p.
The well has found something, with wireline logs apparently indicating the “possible presence of hydrocarbon bearing sandstones“. But it now needs to be deepened to check further targets, and progress has been delayed by the need to drill a side-track for mechanical reasons. The delays have increased Falkland’s share of the well costs too, though the firm assured us it has “sufficient funds and contingency” to finish the job.
So, does the falling share price make Falkland Oil a bargain, along with its exploration partners in the region? It’s risky, but I think it does.
Bigger fall
Look at Rockhopper (LSE: RKH), for example. Rockhopper explores around the Mediterranean basin too, but it shares an interest in the Zebedee and Isobel Deep prospects in the North Falklands Basin — both in areas of very promising production potential. Yet look at its share price, which has crashed 51% since a recent peak at the beginning of June, to 41p.
That’s down to the oil price, which has slumped since June, though since the beginning of September it’s been in a relatively stable patch in the $48-52 range. A recovering price would benefit Rockhopper greatly, so are punters worried that the firm might not have the cash to see it through? They shouldn’t be, with the company reporting cash resources of $160m at the interim stage on 30 June, a half which chairman Pierre Jungels described as “a fantastic start to our 2015 North Falkland Basin exploration campaign“.
Biggest fall
If you want a bit more safety through diversity, how about Premier Oil (LSE: PMO), another of the Falklands crew but also with interests widely scattered around the world, including the North Sea and South East Asia? The Premier share price is down 70% over the past 12 months to 78.6p, but it has been even lower — from a 52-week low of 60.6p on 29 September, we’ve seen a 30% recovery.
Premier Oil is significantly debt funded, but it is productive and is forecast to report a profit in 2016 — and even pay a modest dividend! A P/E based on those forecasts would be around 16, though that’s not so meaningful for a relatively small oil explorer — but the valuation of its assets puts the shares on a Price to Book Value (PBV) ratio of only around 0.4, which looks attractive to me.
Are these three oilies good value now? Well, they’re all risky and it’s not for the faint-hearted, but we could be looking back on a great buying opportunity today.