Tap Oil: Result 2013
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This should be the final year spent by Tap Oil as an oil company that doesn’t produce any oil or gas. Later this year, new production from Thai fields will restore production, initially at rates of about 5,000 barrels a day.
Until then, the company’s results will remain rather dull. Tap produced zero oil last year, down marginally from the 100,000 barrels produced the previous year. Revenue fell 35% to $27m from the sale of contracted gas. Since that gas is not held on Tap’s books, it technically doesn’t count as production even though it contributed revenue.
Gas sales were lower than expected because a customer went bust and Tap was forced to sell contracted gas at lower spot rates – which goes to show that nothing, even a legally binding contract with fixed prices, is certain in this business.
Key Points
- Lower than expected revenue
- New production this year
- Appears cheap; Speculative Buy
Exploration write-offs and impairments featured heavily, with a $47m charge resulting in a reported loss of $39m for the full year. That's the a result of an expensive exploration gamble off the coast of Ghana that didn’t work. Tap indicated that lower than expected revenue and a delay at the new Manora project meant it would draw down on debt faster than expected. With Tap’s existing $43m cash holding and Manora generating cash flow from August, that shouldn’t be a problem.
| Year to 31 Dec | 2013 | 2012 | /(-) (%) |
|---|---|---|---|
| Production (mmboe) | 0 | 0.1 | n/a |
| Revenue ($m) | 27 | 41.5 | (35) |
| NPAT ($m) | (39.4) | (3.5) | n/a |
| Dividend (cents) | 0 | 0 | n/a |
The offshore installation of production facilities for the Manora project is now almost complete. Tap is on the brink of morphing from a business with limited cash flow and zero production to one that produces about 5,000 barrels of oil a day.
At that level of production, Manora should generate operating cash flow of about $100m in 2015/16. Although this will decline and much depends on the reinvestment skills of management, the current market capitalisation of the business is just $110m, more than offsetting risks.
Investors have needed patience with this business, but with new production imminent, that patience may soon pay off. The share price has fallen 10% since 02 Sep 13 (Speculative Buy – $0.51) and Tap remains a SPECULATIVE BUY.
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