While there were no obvious negative surprises in the statement, the lack of tangible newsflow on either drilling or farm-out deals (which could help with funding and provide independent validation of assets) has drawn the market's ire.
The £2.1 billion cap - which has 20 licences (18 offshore and two onshore) located in 10 countries including Tanzania, Kenya, Equatorial Guinea and Gabon - listed back in July 2011 at 250p and was initially extremely popular with investors as it enjoyed considerable success with the drill-bit offshore Tanzania.
Concerns over how the group would fund its ambitious growth plans (last October it set out a $650 million 2013 drilling programme against a cash pile at the time of just over $200 million) prompted a sell-off. Although in March it addressed this funding gap by tapping shareholders for £553 million.
A note in June from broker Jefferies identified four key factors which could help get the shares back on track in the second half of the year.
'1. Farming down exploration acreage – looking for risk diversification, capital management and third-party validation. 2. Crystallising value in Equatorial Guinea – looking for cost exposure reduction, cash into the business (or capital carry), gas development expertise. 3. Confirmation of firm drill timelines (including rig contracts) on key exploration wells – Gabon pre/post salt, Tanzania Block 1, 3, 4 (outboard prospect section), Tanzania Block 7, Tanzania East Pande, Kenya Block L9 and Ghana. 4. Drill bit success.'
Arguably these results fail to fully deliver on the majority of these milestones and VSA Capital analyst Dougie Youngson believes the update on Equatorial Guinea, in particular, to be a concern. 'The statement suggests an ‘in principle agreement’ with the Government to ‘review commercialisation’ for block R gas including floating liquefied natural gas (LNG) which suggests to us that it is maybe struggling on time and commerciality.'
More positively Youngson does laud today's appointment of industry veteran Vivien Gibney, formerly of Mobil and Enterprise Oil, as non-executive director, describing it as 'an excellent appointment and will add gravitas and experience to the board.'