Gulfsands Petroleum seeks fast track opportunities for new non-Syria businesses
Gulfsands Petroleum (LON:GPX) today said it is looking for a ‘fast track’ opportunity to build another non-Syrian based business unit.
The firm said that it intends to maintain its presence in Syria to preserve value for shareholders and protect its legal rights over the assets there.
It also plans to consolidate its interests in Tunisia.
In today’s financial results for 2011, Gulfsands revealed that the political and humanitarian crisis in Syria has overshadowed what would have otherwise been a very successful year.
In December, Gulfsands declared force majeure over the Block 26 PSC as international sanctions on Syria’s oil industry tightened. Gulfsands ceased its involvement in exploration, development and production operations in the country.
As such it currently receives no revenue from its principal asset in Syria, which comprises the majority of the group’s oil reserves – with 74.5 million barrels of 2P reserves in Block 26.
Today’s results show that prior to the troubles, however, the group’s investment in Block 26 was really starting to pay off. It revealed that it generated 34 per cent more cash from its operations last year and profits were up 23 per cent at US$55.1 million.
Oil production was affected by the troubles in Syria during the year and at the government’s request, output was at times intentionally constrained.
Working interest production averaged 8,542 barrels a day during the year, which represents a 17 per cent decrease from last year.
The company ended the period with US$124.2 million in the bank.
“We can but hope that the coming months will bring some respite from the present acute difficulties in Syria, most importantly for the population but also for the company and its shareholders,” said chairman Andrew West.
“In the interim, we are leaving no stone unturned in our continuing efforts to find attractive opportunities to deploy our financial and technical firepower into "fast track" geographical diversification.”
Chief executive Richard Malcolm explains that Gulfsands already has the foundations to achieve this goal with significant financial resources, highly competent human and technical resources, as well as credibility in the oil industry.
He says there are numerous opportunities for Gulfsands to acquire both exploration acreage and prospective production at an attractive cost of entry.
“Several such opportunities are currently being evaluated. In all cases, the emphasis is upon cash preservation, the ability to fast-track production and the opportunity to maximise the company's operational strengths and experience,” Malcolm adds.
So 2012 promises to be an exciting year, he says, as Gulfsands applies its proven strengths to establish a stronger base from which to build future value for shareholders.
“Gulfsands has sufficient cash to meet its objectives for the short to medium term,” Seymour Pierce analyst Dougie Youngson said in a note to clients.
“This also presents an attractive proposition for any potential takeover of the company, with current ongoing rumours of a Chinese bidder.
“The company has stated that it will have effectively disposed of all of its Gulf of Mexico assets in 1H2012 which will result in additional cash for the company.”
He adds: “Overall these are a decent set of results in a very difficult operating environment.”
The analyst says Gulfsands has a progressive management team and a robust asset base.
“We feel the company’s share price represents clear value to investors at its current level.
“In the event of a political resolution in Syria, we expect Gulfsands to return to previous trading levels.”
Seymour Pierce has an ‘add’ rating for the oil firm. Youngson has a broad target range for the stock to reflect the group’s valuation under the current circumstances (target of 146p) and under normal operating circumstances (366p).