DG analysis https://www.detroitgate.com/calvalley-petroleum-yemen-issues-continue-to-cloud-2q-results/208/
Calvalley Petroleum posted mixed second quarter results during trading hours on Monday, with cash flow per share in-line with consensus and our estimates, but the firm noticed second quarter net production of 2,496 barrel per day was downgraded by 221 barrel per day because of security issues.
We noted that the political situation in Yemen is a short-term worry for us, but we admin that Yemen in its more current history has maintained oil contracts with foreign companies. Several attacks on the Ras Isa export terminal keep on forcing crude oil export locked in from the western part of Yemen. In spite of company’s sales moving east along the Masila system, by and large security and the incapability to materially hike Block 9 production remained inclined to overshadow on the stock. Saying that, the firm persists to do what it is possible to keep production and a strong balance sheet in better condition.
While we see upon its quarterly results as less valuable, company posted cash flow per share of S$0.10, in-line with our $0.11 forecast. Production of 2,496 barrel per day (net) was 7.2% lower than first quarter volumes of 2,687 barrel per day. Operating costs of $20.85 per barrel were larger than our forecast of $17.00 per barrel, which indicates a processing fee for the larger sulphur content of the Block 9 blend. The average second quarter netback was $37.42, lessen than the netback of $46.65 in first quarter, indicating lessen average acknowledge prices and rise in operating costs over the earlier quarter.
Considering our updated proved and probable net asset value of $3.30, company is trading at a noteworthy discount of 46% to its competitor average of 89%. As we consider the valuation proposal, the insufficient catalysts and Yemen worries are inclined to act as overshadow on the stock near term. We reiterate our “Sector Perform” rating on company and our 12 months target price of $2.51 per share, derived from our updated risked net asset value per share of $2.74, compared to $2.70 earlier.