More on Burren Energy
Burren Energy
Burren Energy, the oil and gas exploration and production company, reported mixed results for the first half of 2004. The company holds a portfolio of core producing assets in the Caspian state of Turkmenistan and Congo, West Africa
A strong operating performance was offset by a higher deferred tax charge resulting in a flat post tax
profit. Turnover grew 65% because of higher production volumes (+71%) in Congo and Turkmenistan, as well as better prices. Gross margins were firm at 61.5% (1H2003:60.2%) but administrative expenses were higher due to an exceptional incentive charge of £1.5m arising from the exercise of employee share options. The share option scheme operated by the company prior to flotation provided that any charge to employers’ national insurance contributions arising on exercise of options would be met by the company, hence the exceptional charge. Given that the incentive charge is almost equal to 70% of other administrative costs (or 14.7%% of post tax profits) and is difficult to forecast, it introduces an element of uncertainty to earnings. This may serve to dampen movements in the share price as any good news that causes the share price to increase could also lead to the exercise of options that results in a charge to profits.
The shipping business recorded a loss of £0.3m against last years profit of £0.9m.
EPS was 7.62p, 43% lower than the 13.27p reported last year. This reflects the shares issued upon flotation and the related exercise of warrants which caused a 72% increase in the weighted average number of shares between the two periods.
Operating cashflow was strong at £21.4m(+63%) and the reported reserve position improved: proven plus probable oil reserves for the Group were 133 million barrels (+12%).
The company’s operational performance looks solid and is reflected in its share price that has increased fairly rapidly from the listing price of 130p in January 2004 to the current 363p, having peaked at 392p in July when 18% of the stock was placed with institutional investors.
With high oil prices unlikely to reverse in the short term and an improved reserve position Burren’s operational performance should be healthy. Trading at 363p, the prospective PE is 7x, at the lower end of the sector range.
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