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Salamander Energy plc

As tensions run high throughout Ukraine the Brent crude price hots up igniting investors’ appetite for oil & gas equities. SMDR present a very real buy case based on its recent operational news from its West Kerendan gas discovery or the recently amended favourable terms from its Bualuang field. Salamander Energy is clearly not short in the leg department although showing them off has been a rare commodity.

Salamander Energy looks poised to surface from within the city’s broker pool as Canaccord and Deutsche offer buy ratings with target prices set at 145p and 175p respectively in the wake of yesterday’s announcement. Today’s 2013 final results show revenues more or less in line with market forecasts with a rise of 31% to $482.2m. Pre-tax profit was $47.3m from $10.8m a year earlier, a rise of nearly 400%. Net assets stood at $402m and year-end cash and funds stood at $265m. With a market cap of around £260m, it looks to have the fundamental backing along with a good outlook for increasing revenues and profits in 2014.

Operational highlights included West Kerendan-1 exploration success adding 43 MMboe to contingent resource, Bualuang contingent resource increased by 129% to 27.8MMbo, average daily production up 31% to 14,200 boepd. SMDR also reiterated its production guidance for 2014 of 13,000 to 16,000 boepd.

We here at ValueTheMarkets believe the perfect storm is brewing for Salamander Energy as operations evolve, financials incline with technicals infusing together pushing the Rsi ahead of 50 suggesting an imminent return to the teens over the 100p mark. Salamander trade just off the bottom of its 5yr chart delivering a limited downside against a significant upside.

We initially target 148p

Salamander Energy Forecasts

Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG EPS Grth
31-Dec-14 304.37 124.15 11.40p 8.9 n/a n/a
31-Dec-15 289.36 118.61 6.06p 16.7 n/a -47%

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