Ophir Energy has slid nearly 5% on concerns the company could come to the market for cash to fund its developments.
The Africa focused oil and gas group held a capital markets day on Tuesday where it outlined its prospects and strategy, but analysts came away saying the company could need a hefty fundraising. Societe Generale cut its target price from 590p to 580p with a sell rating while Bank of America/Merrill Lynch reduced its recommendation from buy to neutral. Merrill said a development in Tanzania was distinct from a proven play in Mozambique from Eni and Andarko which was "a concerning new revelation" and will now not be drilled until mid-2013. It said:
This means [the first well there] is targeting an unproven play with a higher risk on both trap and charge.
On funding the bank said:
We adjust our 2012 estimates with management forecasting 2012 net cash of $200mn and 2013 capital expenditure of $650mn leaving a "discretionary spend" shortfall of around $450mn. While Ophir has received numerous farm-in offers none have been concluded as yet. If farm-outs are not concluded in the first quarter of 2013 then the pace of investment could be slowed or equity raised, both of which could negatively weigh on the shares, in our view.
Ophir is currently 27.5p lower at 553.5p.
