Investors cheer a $100 million buyback announced alongside mid cap oil explorer Ophir Energy's interims (OPHR). The shares advance 3.8% to 206p as the company also announces a better than expected first half net cash position of $1.49 billion.
The £1.2 billion cap has endured a difficult 2014 to date with the shares losing nearly half their value on a series of disappointing drilling results – in particular from the highly anticipated three well campaign offshore Gabon. Though the costs of this drilling were carried by its partners the company has been heavily punished by investors, with some in the City seeing the company as a possible takeover target.
The sale of 20% of its interest in Blocks 1, 3 and 4 in Tanzania to Singapore's Pavilion Energy for $1.25 billion in March both bolsters the balance sheet and benefits the P&L for the period. Accordingly the company reports an interim pre-tax profit of $589 million.
The company is set to drill five wells in the second half across acreage in both Tanzania and Equatorial Guinea. The East Pande prospect could be particularly significant as the company sees potential for oil in a basin which so far has largely delivered gas finds. Next year is expected to see capital expenditure reduce significantly ahead of a renewed exploration effort in 2016.
Deutsche Bank reiterates its buy recommendation at 330p price target and comments: 'An unexpected $100m share buyback programme will likely be welcomed by investors who have been calling for a return of capital post-completion of the Tanzania disposal.'
Westhouse Securities is more circumspect, cutting its price target from 290p to 245p and staying at add. It notes: 'There are no major surprises in the results, however, the size of buyback is probably a bit disappointing given the amount of cash on the balance sheet. We do not believe that these results or the buyback announcement will trigger a sustained rally in the shares, despite the recent underperformance.'