Small Talk: Petroceltic still on the track of North African oil

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The Independent Online

Stock markets are easily rattled. The slightest whiff of uncertainty can trigger sharp share price fluctuations. Take the onset of the so-called Arab Spring of protests earlier this year. The first signs of turmoil kicked off concern around a number of companies that operate in the Middle East and North Africa. Sector was no bar. The Jordanian pharma group Hikma Pharmaceuticals and the gold producer Centamin Egypt, to name just two, saw their share prices wobble in late January and over much of February as protests spread from Tunisia to the wider region.

Petroceltic was also caught up in the sell-off. The oil and gas prospector saw its share price go from above 15p in the middle of January to around 10p at the beginning of March. And although it is notoriously difficult to pin the precise cause of share price falls, the fact the company is active in North Africa was, as analysts highlighted at the time, more than merely coincidental.

Until very recently, the group was active in both Tunisia and Algeria, and although a dry well prompted it to move out of the former before the Ben Ali regime was toppled, market jitters proved potent enough to drive the share price lower. Not that the turmoil has resulted in putting Petroceltic off the region. Far from it, for the group is open to revisiting Tunisia. Meanwhile, the company, which also has some interests in Italy, has made inroads in Algeria, where earlier this month it announced a farm out agreement on its Isarene permit.

The deal will see European energy major ENEL buy around 18 per cent of the Isarene production sharing contract, which includes the Ain Tsila gas discovery onshore Algeria. Petroceltic followed that up with news of a placing to raise around $60m (£36.4m), giving it the muscle to advance its drilling and appraisal plans in the country. The money will also fund drilling plans, its Rovasenda prospect in Italy, and other ventures.

The farm out was welcomed in the City, with Mirabaud labelling it an "excellent deal" for Petroceltic. "In addition to gaining the funding benefits from the farm in, covering both back costs and the current, expanded campaign, the company has also picked up a first rate strategic partner," Mirabaud said.

"ENEL is one of Europe's largest utility companies, and a major buyer of Algerian gas, as partner in both the Medgaz and Galsi trans-Mediterranean pipelines. As such, it brings clout in dealing with Algerian authorities, and expertise in European gas marketing. This should enable the partners to progress field appraisal and development, and monetise the value of the giant Ain Tsila gas discovery."

And what of the shares, which remain below the January peaks? Well, total net asset value on Mirabaud's estimates stands at more than 27p per share, leaving ample room for upside gains.



Ebiquity eyes social media

Facebook and Twitter boast millions of users – and millions of opportunities for companies to plug their products and gauge market trends. No surprise then, that market research firms have been rushing to burnish their social media credentials.

It is the same rationale that drove Ebiquity, the Alternative Investment Market-listed media insight and analytics business, to shell out up to £10m to buy Echo Research earlier this month.

The deal will allow Ebiquity to offer its clients data and advice on social media. The target is well established in the digital world, with analysts at Edison Investment Research highlighting its roster of blue-chip clients, including Shell, HSBC and Pfizer.

Moreover, it's no upstart. The business has been around for more than two decades, and won numerous awards for its digital nous. Digging deeper into the numbers, Edison analysts reckon that the deal is likely to prove earnings accretive in the first full year of the acquisition.

"During the year to 31 March 2011, Echo achieved turnover of £5m and normalised operating profits of £500,000," they said, pointing out that, as with past deals, Ebiquity has identified synergies between its own business and its buy. "This, together with cross-selling opportunities for Ebiquity's existing clients should enable Echo to be earnings accretive in the first year of ownership and beyond."

Numis was also positive, and upgraded its forecasts in response to the deal. From pre-tax profits of £6.5m with earnings per share of 6.8p per share before the deal, the broker now estimates £7.4m in profits with 7.4p in earnings for 2012.

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