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Ophir Energy, a firm with oil and gas operations in Kenya, Tanzania, Gabon and Equatorial Guinea, has benefitted from market conjecture. The talk on the trading floors is that US multinational Chevron is keen to take a sizeable interest in the company.
The current cash balance of over £300 million, and last year’s expenditure of £12.5 million, mean that the business does not need a cash injection from a larger company. There has been a trend in the last year for major companies to look around their smaller counterparts, especially those that have quantified reserves. One reason we could well see a sustained period of mergers and acquisitions in this sector is that, with commodity prices falling, many of the major resource companies have effectively mothballed their research and development arms and subsequently seen their overall pool of reserves dwindle.
Although of the twenty brokers notes on the company, seventeen are ‘buy’ or ‘strong buy’, brokers have been reducing the ’blue sky‘ outlook for the company by lowering their price targets. If the speculation surrounding Chevron’s interest were to firm up, these targets could well be reassessed.