UK energy stock Energean LSE:ENOG has been pushing out some pretty positive news recently. The oil firm has published revenue and production guidance of $2bn for the year with production of between 1.0 and 1.5 kboed.
A maiden quarterly dividend was announced of 30 cents (US) per share last month, for Q2. This was underpinned by strong cash flows from its ex-Edison assets during the first half of the year.
Excellent results from Energean’s Hermes
Possibly more importantly for investors, we had Energean’s offshore Israel results from Hermes where the company announced a gas discovery of between 7 and 15 bcm of recoverable natural gas resources. This got attention at a time when there is such a premium on natural gas resources from stable jurisdictions.
Detailed analysis of the data collected by the Hermes well is ongoing, with the aim of refining volumetric estimates and potential commerciality for both the discovery and the full area. The Hermes discovery has helped to de-risk Energean’s nearby Poseidon and Orpheus structures, which represent attractive potential future appraisal targets to fully assess the potential of the area around block 31.
Energean has already reported earnings results for the half year ended June 30, 2022. For the half year, the company reported sales of USD 338.96 million compared to USD 205.47 million a year ago. Net income was USD 118.73 million compared to net loss of USD 35.55 million a year ago. Basic earnings per share from continuing operations was USD 0.67 compared to basic loss per share from continuing operations of USD 0.2 a year ago.
Higher energy prices are a boon for Energean
Energean has obviously been a major beneficiary of the higher energy prices caused by the war in Ukraine. The company is involved in exploration, development, and production of oil and gas. It operates through four segments: Europe, Israel, Egypt, and New Ventures.
Energean holds interests in the Eastern Mediterranean. Its flagship project is the Karish and Tanin development located offshore Israel. The company has 965 million barrels of oil equivalents of proven and probable, and contingent resources. It also provides financing services and holds a gas transportation license.
Things to pay attention to
Energean is already starting to look more robust financially. The balance sheet – liabilities and price to book ratio – are looking particularly healthy. We also note EBITA growth of 52%. With its $2.4bn market cap Energean is still a lot smaller than the big players in the market like Shell – $161bn – but there is plenty of scope for aggressive growth here if energy prices remain elevated. OPEC’s recent decision to prop up global oil prices will help energy plays like this one.We ran some analysis on Energean using Deshe Analytics data and Energean holds up well against Shell shares, with an overall healthier balance sheet and solid income statement. The Energean share price has been on a recent surge since July, and while it has run out of momentum recently, we would expect only a conservative retracement. Investors interested in the stock should be looking to pick some up at around GBP 10 or lower.
Technical analysis of Energean share price moves in recent months demonstrates that the stock still has considerable momentum. The MACD indicates a strengthening trend here. Keep an eye on this one.
Risk factors? Energean announced last week it was beginning flow testing of pipes between Israel and the offshore Karish field. Israel claims the Karish field for itself, but neighbouring Lebanon, with which Israel is still technically at war, also has a claim. Israel and Lebanon are engaged in on-off talks to try to resolve their Mediterranean border.
