Investment Column: Buoyant Petrofac set to drill its way back into the North Sea oilfields

Britvic; African Barrick Gold


Our view: Buy

Share price: 668p (+13p)

Petrofac yesterday unveiled plans to move back into the North Sea as an owner of assets, as well as a provider of services. Alongside an upbeat trading statement, the group said it will acquire a 20 percent stake in three oil fields by selling an 80 percent stake in a floating production facility to oil explorer Ithaca Energy, the operator of the licences, to help it develop them. The group's previous North Sea assets were spun off in 2010 into a separate company, Enquest.

The Ithaca deal is not a bad move, when you take account of the fact that much of the world's energy resources are to be found in places which aren't always very stable.

Not that this is stopping Petrofac, which was talking up its prospects of bidding for new work around the world as it reiterated guidance that this year's profits will be at least 15 per cent higher than last year.

The group's order backlog at 30 September stood at $10.8bn (£6.9bn), down $600m from 30 June. However, since the end of the quarter that has been augmented by $1.2bn, as a result of the recent signing of production enhancement contracts with Pemex in Mexico.

Whatever one might feel about it, the world is thirsty for energy. Petrofac might not be the most recognisable of names in the FTSE 100, but it has proved to be very successful.

We said sell in March, the right call given the performance of the shares since.

However, now we are prepared to dip back in. In the current climate, energy looks to be a defensive sector. Given its current tight supply, we think oil will head higher over the coming months.

On a valuation of just 11.9 times next year's forecast full year earnings, Petrofac is by no means expensive. Buy.

Britvic

Our view: Buy

Share price: 328P (+19.7P)

Has Britvic lost its fizz? The company's trading statement yesterday suggested a slowdown in its fourth quarter: revenues rose by only 0.3 per cent compared to strong growth in the third, held back by falling sales in Ireland and France.

But while the problems of the former are hardly surprising given its economic troubles, the French business (acquired last year) did face particularly tough comparatives. Britvic's fourth quarter is made up of July, August, and September.

Last year in France those months were hot, this year they were not. So a fall in sales of 1.5 per cent is not a bad result. What's more, the British and international franchise operations did well.

For the year to 2 October, overall group revenues grew 0.8 per cent, and by 14.6 per cent to £1.3bn including that French business, acquired in the third quarter of last year. The group also pushed through some price increases: the GB and International average realised price was 2.1 per cent higher.

The shares have fallen since we last updated our view in December. So much so, that the valuation is starting to look very compelling. The stock trades on a multiple of just 8 times full year forecast earnings, with a cracking prospective yield of 6 per cent. To put this in perspective, Panmure has highlighted that the valuation represents a discount to the group's international peer group of about 45 per cent. That's undeserved. Soft drinks are clearly not entirely immune from economic woes. But these shares are undervalued. Buy.

African Barrick Gold

Our view: Hold

Share price: 529p (-35p)

Shares in Tanzania-focused miner African Barrick Gold shuddered a little yesterday after it became clear that the African country's government wants the company to agree to raise the royalty it pays from 3 per cent to 4 per cent to fall in line with new legislation.

Such a move would have to be voluntary – existing agreements in theory protect current mines. But new ventures would face the new rate, and as a long term operator in the region, ABG may ultimately have to cough up.

All miners are dealing with the fact that Governments are increasingly of the view that they should take a bigger slice of the revenues from the natural resources to be found in their territories. It's hard to argue against this. But it all rather took the gloss off a good set of third quarter results at ABG.

Revenue grew 61 per cent, to $354m (£225m), driven by an 11 per cent increase in gold production (182,401 ounces, ahead of expectations) and a 44 per cent increase in average realised gold price – $1,774 per ounce.

Net profit surged by 156 per cent to $102m, even though costs increased (12 per cent to $687 per ounce). The group also sits on a chunky cash pile: $525m. That can fund deals.

Although costs are rising, the group is likely to continue reaping high prices for its product (not least because of economic turbulence).

ABG is one of the our tips of the year, but has eased a bit since we highlighted it at 611p. We're still of the view that it can progress, though. Hold on.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk