https://www.proactiveinvestors.co.uk/companies/news/70713/circle-oil-story-starts-to-take-shape-as-egypt-stabilises-70713.html
The return to a more stable political footing for Egypt is expected to coincide with an upturn in foreign investment.
For those already in the country, among them (), doing business
is this period of turmoil has rarely presented a problem.
This, according to the company’s chief executive Chris Green, owes much to the consummate professionalism of the state-owned Egyptian General Petroleum Corporation (EGPC).
“Operationally we never stopped. EGPC is a well-honed working piece of the state,” he told Proactive Investors.
“Given there have been changes in the political situation, they have done a very good job.”
Circle’s prelims revealed Egypt made a very healthy contribution to the company’s US$53mln of cash generated last year and it will continue to be an integral part of the business.
The AIM-listed group expects to participate in the country’s next licence round, and may consider “farming into a discovery, a producing field or one that needs rejuvenation”.
“We are certainly interested in doing more work in Egypt,” Green said.
Circle’s is a story that is really beginning to take shape. As of the last update it was producing a net 4,973 barrels a day 5.25mln cubic feet of gas.
At the same time it has an enviable drilling record in Morocco, where it is targeting gas, while we are awaiting results from the high impact EMD-1 offshore well in Tunisia.
In a recent note to clients, analyst Brian Gallagher called the Morocco wells small but mighty, referring to the relatively low cost to drill an opportunity compared with the payback, which is aided by the state’s generous fiscal terms.
“We have a 12 well programme outlined,” said Green.
“But we can also think of carrying on and drilling more, or accelerating that by having more than one rig. There are opportunities to monetise and increase revenue by doing more in the permits we have got. There is strong demand from gas market is there.”
Tunisia also offers the opportunity to move the dial a little for Circle – estimates it is worth a ‘risked’ 4p a share, or 27p unrisked.
Circle’s expansion plan will be aided by the US$100mln reserve based lending facility provided by the IFC, part of the World Bank group. However, this particular pot of cash is likely to be spent on more mature development or producing assets rather than more speculative projects, said Green.
With operating profits of US$32.3mln – up 15% on the year earlier – and more importantly available cash US$26.2mln as at the financial year-end one wonders how long it will be before Circle joins the dividend club.
“Dividends are discussed and it is a balance of what’s in the best interests for everyone,” said Green.
“I can see it in the future, but exactly when will be a board decision, but it is nice to be in a position to be able to think about it.”