Sirius Minerals PLC

United Kingdom-based Sirius Mineral Plc (LON: SXX) is a resource development company and is into the development of a polyhalite deposit situated in North Yorkshire, the United Kingdom. Its headquarters is located at Resolution House in Scarborough, North Yorkshire. The group is currently a constituent of the FTSE All-Share index and is listed on the London Stock Exchange.

Recent News
Anglo American Plc released a statement on 8^th January 2020 with an intention for a possible offer for Sirius Minerals Plc by Anglo American Plc. Anglo American Plc confirms that it is in discussion with Sirius Minerals Plc in relation to a possible offer in cash, at a total consideration of 5.5 pence per Sirius share. Entire issued share capital would be valued at 386 million pounds.

Financial Highlights (for the period ended 30 June 2019)
In the first half of the financial year 2019, the company’s operating loss increased from GBP 10.8 million (H1FY2018) to a loss of GBP 14.3 million in H1 FY19due to a higher level of corporate and sales and marketing costs incurred by the company. In the first half of the fiscal year 2019, the company’s loss during the period was GBP 3.1 million as compared to a loss of GBP 95.3 million in the first half of the financial year 2018 due to fair value gains attributable to the Company’s derivative instruments.

The basic earnings per share stood at 0.06 pence in the first half of the financial year 2019versus basic earnings per share of 2.10 pence in H1 FY2018. The diluted earnings per share stood at 0.47 pence in the first half of the financial year 2019 versus diluted earnings per share of 2.10 pence in H1 FY2018.

Share Price Performance

Daily Chart as at January-08-20, before the market closed (Source: Thomson Reuters)

On 8th January 2020, Sirius Minerals PLC shares were trading at GBX 5.50 at the time of writing before the market close (at 12:30 PM GMT), up by 34.146% against the previous day closing price. Stock's 52 weeks High and Low are GBX 26.84/GBX 2.10. The company's stock beta stood at 2.05, reflecting the higher volatility as compared to the benchmark index.

The shares of the company have delivered a negative return of around 63.91 per cent in the last six months. On a year to date basis, the company’s stock has given investors approximately 55.98 per cent of a positive return.

Key Risks
A failure to complete the successful construction of the necessary facilities would hamper the company’s ability to operate. Liquidity crunch is also a risk to the business of the company. If the company is not able to obtain enough amount of funding, it could affect the operations of the company. Exchange rate risk could affect the profitability of the company.  The uncertainty regarding construction delays could affect the company’s business. Brexit uncertainty could also affect the operations of the company.

Conclusion
The UK-Based miner is in advanced discussions with Anglo American Plc over a 5.5 pence per Sirius share cash bid that would value the company at approximately £386 million.For a potash mine, the company’s plans under the North Yorkshire moors have been in critical problems for the short-term period. The company has made significant progress across the construction segment.

The company’s financial loss has declined. The company has deployed GBP 240 millionduring the period for project development. The company is looking on financing the construction of its asset. There are some uncertainties and risks which could impact the business of the company.

Based on the above rationale, we recommend investors to keep a “Watch” on the stock at the current price of GBX 5.50 (as on 8^th January 2020, before the market close), with support from few catalysts needs to be evaluated at a later stage. 

Premier Oil PLC

Premier Oil Plc (LON: PMO) is a London, United Kingdom-based multinational oil and gas exploration and production company. The company has oil and gas interests in Latin America, the Falkland Islands, South East Asia and the North Sea, where the group seeks to invest in high-quality opportunities.

On 5^th March 2020, the company will announce the Annual Results for the year ended December 2019.

Recent News
On 7^th January 2020, the company has announced the acquisitions of Andrew Area and Shearwater assets from BP (BP Plc) for 625 million US dollar. It has also announced the acquisition of 25 per cent stake in the Tolmount Area assets from Dana for 191 million US dollar plus contingent payments of 55 million US dollar. These transactions will contribute to augment group’s production by 2024.

Trading and Operations Update (as on 7^th January 2020)
The company released its trading and operations statement ahead of its 2019 Full Year Results. At the upper end of full-year guidance, the production was 78.4 kboepd in 2019, underpinned by continued high rates from the Premier-operated Catcher Area and high operating efficiency. The company continues to anticipate First Gas before year-end, with Tolmount adding 20-25 kboepd to Premier Oil production once on the plateau. During the first half of 2020, the company plans to select the optimal field development, through Tolmount East project sanction and also aimed for the second half of 2020. For 2019, the company expects opex, excluding lease costs, of US$11/boe and total capex of US$300 million. Net debt decreased by more than US$330 million to US$1.99 billion from US$2.33 billion and was in line with the guidance.

Share Price Performance

Daily Chart as at January-08-20, before the market closed (Source: Thomson Reuters)

On 8th January 2020, Premier Oil PLC shares were trading at GBX 107.25 at the time of writing before the market close (at 1:55 PM GMT), down by 8.92% against the previous day closing price. Stock's 52 weeks High and Low are GBX 120.70/GBX 64.48. The company's stock beta stood at 3.56, reflecting the higher volatility as compared to the benchmark index.

The shares of the company have delivered a positive return of around 36.53 per cent in the last six months. On a year to date basis, the company’s stock has given investors approximately 9.36 per cent of a positive return.
Conclusion

For 2020, the total production and development capex will be US$320 million.Further, the company expects to spend US$30 million on abandonment and US$90 million on appraisal and exploration. The company's robust operational performance in the financial year 2019 has created substantial free cash flow for the company, enabling them to materially decrease the debt levels and to invest selectively in the portfolio for upcoming growth.  The Tolmount development will provide a step up in the company’s production once on-stream at the year-end 2020 and is also making good progress. 

These acquisitions are in line with the asserted strategy of acquiring cash-generative assets in the United Kingdom North Sea and are materially value accretive for the company. From the acquired assets, the cash flow generated will also hasten the deleveraging of the company's balance sheet.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 107.25 (as on 8^th January 2020, before the market close).

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.