Phoenix Global Resources PLC (LON: PGR)

Phoenix Global Resources PLC (LON: PGR) is a United Kingdom-based independent oil and gas production, and exploration company with an operational presence around Argentina, Colombia, and Paraguay. PGR produces approximately 3,500 bopd (“barrels of oil equivalent per day”) from approximately six conventional fields in Argentina and over two conventional fields in Colombia.

Growth Prospects

• Strong Average Daily Oil Production: The adverse impact of the 2020 shutdown led to an increase in average daily oil production from 3,546 bopd in H1 FY20 to 4,258 bopd for H1 FY21.
• Mata Mora Project: The Company had obtained a 35-year unconventional exploitation concession over 43,372 acres. Meanwhile, the Exploration rights over 11,918 acres in Mata Mora got extended for five more years.
• Encouraging Drilling Pipeline: PGR had completed the site preparation activity for both the locations in Corralera. Furthermore, the Company had managed to complete the Successful pulling interventions at Tupungato and Atamisqui.
• Global Energy Crunch: The tightening supply of oil caused a rally in Brent Oil price, which would indirectly benefit the top-line business of PGR.

Key Risks

• Failure to Discover Substantial Reserves: The failure in discovering substantial reserves could adversely affect the PGR’s future performance as exploration and development are capital-intensive activities.
• Cyber Security Risk: The cybersecurity risk has been identified as an emerging risk as breaching of data might hamper operations of the Company to a certain extent.
• Diminished access to Debt Markets: Failure to obtain funding from financial markets after an interest rate hike may result in the delay of exploration activities and development programmes.

Now, we will analyze the Key Fundamental Statistics & Shareholding Pattern of Phoenix Global Resources PLC.

Upstream Capital Partners VI, Ltd. is the most significant shareholder as it holds nearly 1,924.63 million shares as of 30 September 2021.      

H1 FY21 Financial & Operational Highlights (for the six months ended 30 June 2021, as of 14 September 2021)

 (Source: Company result)

• Significant Increase in Top-Line Revenue: The increase in the realised price per barrel had enabled PGR to show a top-line revenue increase from USD 24.9 million during H1 FY20 to USD 36.1 million for H1 FY21.
• Improved Profitability: PGR had narrowed down the net loss from negative USD 55.42 million during H1 FY20 to negative USD 13.68 million for H1 FY21.
• Increase in Realised Oil Price: The realised oil sales price grew by around 20% from USD 39.19 per barrel during H1 FY20 to USD 47.03 per barrel for H1 FY21.

Share Price Performance Analysis

 (Source: REFINITIV; Analysis done by Kalkine Group)

On 27 October 2021, at 08:00 AM GMT+1, PGR’s shares were trading at GBX 5.00, same as the previous day closing price. Stock’s 52-week High and Low were GBX 7.45 and GBX 4.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, reflecting an upside momentum in the stock price.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative) 

Business Outlook

The Company had delivered decent revenue growth during H1 FY21 and achieved positive EBITDA during the period. Furthermore, the Company has a significant drilling pipeline for 2022, including the completion & drilling activities in Corralera and Mata Mora. Meanwhile, the positive impact of the cost reductions and corporate restructure remained visible in the resilient business performance during the H1 FY21. Considering the penny nature of the stock, PGR may witness adverse volatile movements amid rising bond yields, increasing inflation rates, and the Evergrande fiasco. Thus, it would depend on the risk appetite of the clients to take a reasonable position on this Company having decent operational growth catalysts.

Considering the robust revenue growth during H1 FY21, turnaround into EBITDA profit, impressive drilling pipeline, bright industry outlook, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Phoenix Global Resources PLC at the current price of GBX 5.00 (as on 27 October 2021 at 08:00 AM GMT+1), with lower-double digit upside potential based on 8.17x EV/NTM sales (approx.) on FY21E sales (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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