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.


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.

ebookA unique anthology of reporting and analysis of a crucial period of history
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

£60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

C#.NET Developer

£300 - £350 per day: Harrington Starr: C#.NET Developer C#, WPF,BLL,MVVM, SOA...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform