UK oil exploration and production (E&P) outfit Parkmead (PMG:AIM) may not be budging on the publication of its interim results – the shares flat at 62p – but year-to-date the stock is up more than 40% and the company’s relative financial strength could underpin founder and executive chairman Tom Cross’ plans to replicate the success he enjoyed with Dana Petroleum.
For those who aren’t aware of the background, Cross established Dana as a buy-and-build play in the North Sea in the mid-1990s and it was eventually acquired for £1.5 billion by the Korean state vehicle KNOC in 2010.
Cross is on record as saying he hopes Parkmead can be an accelerated Dana and the current market conditions could make this a more realistic goal as lower oil prices lead distressed operators to sell assets at heavily discounted valuations.
The numbers show Parkmead sitting on net cash of £29.5 million as it posts a significantly narrowed loss – £4.8 milllion against £14.9 million a year earlier – for the six months to 31 December. The main operational milestone was the start-up of production from the fast-tracked Diever West gas field onshore the Netherlands.
Panmure Gordon reiterates its ‘buy’ recommendation with a 100p price target and comments: ‘Parkmead retains a strong balance sheet and we continue to believe that Tom Cross, Parkmead’s Executive Chairman, is capable of executing value accretive deals in an environment where asset prices are falling.’
Cantor Fitzgerald is also a buyer with a more ambitious price target of 163p.
It says: ‘We believe the company is well positioned to build out its European footprint through an acquisition-led growth strategy, taking advantage of low asset valuations. Concurrently, the company will organically grow its existing low-cost gas portfolio delivering additional near-term cash flows, and naturally hedging its exposure to oil price weakness.’