Carillion scrambles to stay afloat

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Today’s edition features:

  • Solo Oil (SOLO.L)

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The FTSE-100 finished Friday’s session 0.37% higher at 7,724.22, whilst the FTSE AIM All-Share index was up 0.11% at 1,067.42. In continental Europe, the CAC-40 finished 1.05% higher at 5,470.75 whilst the DAX was up 1.15% at 13,319.64.

Wall Street
Last Friday in New York, the Dow Jones added a further 220.74 points (0.88%) to end the week at 25,295.87.
The S&P-500 added 19.16 points (0.70%) to end at 2,743.15 and the Nasdaq gained 58.64 points (0.83%) to 7,136.56.

In Asian markets this morning, the Hang Seng was 48.32 points (0.16%) lower at 30,766.32 and the Nikkei 225 is closed for Coming of Age Day.

In early trade today, WTI  was up 0.15% at $61.53 per barrel and Brent was 0.10% higher at $67.69 per barrel.


Carillion scrambles to stay afloat
Carillion, the troubled services and construction group, will reveal a new business plan this week in a bid to avoid collapse. The company, one of the government’s biggest contractors, has issued a series of profit warnings in recent months. The turmoil has sent its shares tumbling by 90% since July. The HS2 contractor said it was in discussions about ways of reducing debt and obtaining new funding. A business plan due to be presented to creditors and other stakeholders on Wednesday will form the basis of a “proposal to restore Carillion’s balance sheet”, a spokesperson said. The company employs about 43,000 people worldwide and provides services to half the UK’s prisons, as well as hundreds of hospitals and schools. Analysts estimate Carillion has debts including pensions of about £1.5bn, while its market capitalisation is just £81m. However, the company’s banks, which include Santander UK, HSBC and Barclays, are understood to be reluctant to lend it any more cash. That could force Carillion to seek some form of government support if its banks do turn off the cash taps. Given the number of public sector contracts it holds, some analysts think it is “too big to fail” and that ministers may be forced to step in. Last week the Wolverhampton-based company said it was being investigated by the Financial Conduct Authority over the “timeliness and content” of its stock market announcements from December 2016 to July last year. The state date for new chief executive Andrew Davies has been brought forward to 22 January. In September Carillion revealed a huge loss of £1.1bn for the six months to 30 June on revenues that were flat at just under £2.5bn.

Source: BBC News

Company news

Solo Oil (SOLO.L, 3.88p) – Speculative Buy
Solo has announced that its partner, Aminex, is planning to drill a new well at the Ntorya gas field “as soon as practically possible”. Tendering is in progress for a rig and a spudding date will be announced once a rig has been secured. We anticipate this appraisal well Ntorya 3 (NT-3) to spud in 1H18, potentially 1Q. Other positive news is that Kiliwani North is producing reasonably well – in December the average rate was approximately 9 mmscfd. Aminex is considering a compression facility to maximise recoveries, while technical work is ongoing (e.g. seismic reprocessing) to find new Kiliwani North drill targets. The RNS also notes that a new CPR covering Solo’s and Aminex’s Tanzanian oil & gas portfolio will be published next month, this should be a positive catalyst.

Our view: Great news that NT-3 is going to happen, and most probably soon. The Ntorya Gas Field has had two successful wells thus far, and we expect the third to have a high geological chance of success, and be a catalyst for the stock. We look forward to a spudding date and the updated CPR as near term news items and reiterate our Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to Solo Oil plc


To read Beaufort’s full research archive click here

Compiled by:
Charles Long, Ben Maitland, Sheldon Modeland & Kazunaga Senga
(t) +44 (0) 207 382 8384

Weekly diary

Click here to see all this week’s planned corporate and economic announcements.

During the three months to end-December 2017, the number of stocks on which Beaufort Securities published recommendations was 193, and the recommendations were as follows: Buy – 22; Speculative Buy – 163; Hold – 6; Sell – 2.

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