viewEland Oil & Gas PLC

Eland Oil & Gas investors set for more upside as production grows - broker

The Nigeria-focused oil and gas firm is advancing operations in the field over the summer, investors will be watch for good results

oil and gas operations
Peel Hunt upgraded its target price to 155p

The outlook appears good for investors in Nigeria-focused Eland Oil & Gas PLC (LON:ELA) as it advances programmes to increase production.

Eland last month restarted operations at the Opuama field, where it is presently drilling the Opuama-9 well and it is planning to start drilling the Ubima-1 well in June.

Earlier this month, the company highlighted a new corporate presentation which provides details of the planned 2018 and 2019 drill programmes in Nigeria, which are included in a US$123.9mln capital programme.

READ: Eland Oil & Gas looking forward to Ubima field programme

“Eland outlined its 2018/19 work programme which management expects to more than double production from OML40 by 1Q20,” said James Carmichael, analyst at Peel Hunt.

“In addition, exploration at Amobe could nearly double the resource base, and development of Ubima would diversify the income stream.”

Stockbroker Peel Hunt, in a note, upgraded its price target for Eland to 155p, from 140p, and repeated a ‘buy’ recommendation for the AIM-quoted share.

Plans for production growth

In mid-May, the company said that it had continued to perform strongly in the first quarter of 2018 and highlighted that it had benefitted from higher crude prices, lower operating costs and an improved balance sheet..

Revenue increased to US$39.8mln for the first quarter of 2018, up from US$16.3mln in the final three months of 2017, similarly, earnings (EBITDA) rose by 136% to US$23.9mln compared to US$10.1mln in the preceding quarter. The company ended the quarter with US$18mln of cash.

In regards to project financing, Eland noted that its improved balance sheet can allow an increase in leverage, and as such it is now seeking debt funding. It is seeking US$150-200mln of debt over a three-to-five year period, with the proceeds used to support its field development plans. The company said it believes US$150mln of debt would be serviceable at the lowest Debt/EBITDA levels of its peer group.

Quick facts: Eland Oil & Gas PLC

Price: 165.8 GBX

Market: AIM
Market Cap: £357.57 m

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