Let's ReviewThe company is registered in Canada and controlled by the Swedish Lundin family and yes, the bulk of trading takes place in Sweden. And generally, the structure's a little complicated on this one.
But overall, good news from AOI on revised Nigerian (Prime) reserves for year end 2021, and earnings for 2021, and outlook for 2022, plus the Venus-1 discovery, and the commencement of a semi-annual dividend of $0.05 CAD per share (total annual $0.10 CAD) with record date for first payment March 17.
The upward revision of Nigerian (Prime) 2P reserves at year end 2021 means that, after 2021 production, there's now slightly more proved plus probable oil and gas reserves than there was at the end of 2020. (Downward revision is bad, upward revision is good!)
The evaluation of the Nigerian (Prime) reserves is until the end of the current license only which ends in several years. However, there is a provision in Nigerian law for the extension or conversion of the lease.
The company intends to investigate early extension / conversion of the lease as this would allow extension of the loan repayment by Prime over a longer period of time, thus freeing up money for payment to AOI and possible dividends to shareholders. It might also allow additional borrowing by Prime, and thus allow additional money flow to AOI. Also, the reserve report would recognize the value of the reserves beyond the expiry of the current lease.
The earnings for the 2021 year are $0.40 USD per share or $0.51 CAD, and with a closing price of $2.90 CAD the P/E is 5.68 (using $1.2755 CAD / USD).
The current yield is $0.10 CAD / $2.90 CAD = 3.45%.
The estimate of cash flow for Prime for 2022 is $300 million to $400 million USD. Assuming that all cash flow becomes earnings to AOI, and using the midpoint of $350 million USD, and 467 million shares of AOI, estimated earnings per share for 2022 are $350 million USD / 467 million shares = $0.75 USD per share or $0.96 CAD per share. The estimated forward P/E = $2.90 CAD / $0.96 CAD = 3.03 .
Given the Venus-1 discovery, other direct and indirect investments, Brent oil well over $90 USD, a P/E multiple over 5 seems reasonable to me.
Should the market recognize that AOI could earn $0.96 CAD in 2022, a price of 5 X $0.96 CAD = $4.84 CAD sure seems like a possibility.