hi from a leading broker Key points:
IPM has announced production from its Selmo Oil field in Turkey for the first three months has come in at 149,294bbls or 1,639bopd.
Cash receipts for the first three months totaled $11.2M, which translated to net operating cash flow of $4.5M.
The company has commenced a series of workovers of the 22 operating wells at Selmo and is currently re-interpreting seismic data.
On completion of the seismic re-interpretation and a detailed reservoir model, IPM plans to re-enter existing vertical wells in 2Q06.
New horizontal wells are expected to be drilled in the 3Q06 following the completion of a detailed fracture analysis.
An initial reserve statement is also expected in 3Q06.
At the end of December 2005, IPM had $6.6M in net cash and $6.0m in receivables from oil sale
Both production and free cash flow generation for the first thee months were in line with our expectations.
The workover program has to date performed in line with expectations.
The drilling of new wells in the 2Q06 has the potential to significantly increase production beyond 1,700bopd.
We have not included any new well success in our estimates.
IPM remains fully exposed to the oil price, although some hedging may be put in place in 2006.
T
Investment View:
The result was in line with expectations and has outlined IPM’s earnings potential in 2006.
Based on our oil price assumption for West Texas Intermediate of US$60.0/bbl, Tricom expects IPM to generate $17.4M ($0.23/share) in free cash flow in CY06.
IPM has already indicated it expects to return around 50% of free cash flow to shareholders via unfranked dividends.
Our estimates suggest the company will pay at least $0.10/share in unfranked dividend in both CY06 and CY07, which translates to a yield of 9.3%.
The stock looks cheap, trading on a CY06 P/E of just 4.8X and at a 26% discount to our $1.35/share valuation.
IPM
incremental petroleum limited
