Shares in mid cap oil firm Ophir Energy (OPHR) have gained 3.7% to 61.6p after it announced the $200m cash purchase of a package of producing assets in Vietnam and Indonesia and exploration and appraisal projects in Malaysia, Vietnam and Bangladesh.
Ophir has outlined a plan to rebalance its portfolio towards more significant production. The goal is to improve cash flow to fund future exploration efforts and potentially pay a dividend to shareholders.
The latest transaction, with heavily indebted Aussie firm Santos, is in line with this fresh approach.
NEW APPROACH PAYING DIVIDENDS
At one time dividends from the E&P sector were almost much non-existent. However, Ophir’s strategic move and the emergence of Diversified Gas & Oil (DGOC:AIM) on AIM, which recently announced a switch to quarterly dividends, could reflect a new attitude as the exploration and production sub-sector looks to win attention from investors which have ignored it for a long period.
Ophir’s deal will be funded by existing cash and a new $130m lending facility.
Stockbroker Cantor Fitzgerald estimates 2018 production and cash flow of 25,000 barrels of oil equivalent per day (boepd) and $180m respectively.
In 2017, for context, it produced 11,700 boepd and generated cash flow of $96m.
Cantor comments: ‘This looks a sensible deal at a decent price ($9.7 per barrel of oil equivalent), in a region the company knows well.’
