Kaz Minerals (LON:KAZ) has reported strong half year financials following strong Q2 2016 production results. Group copper cathode equivalent production was up 43% in H1 2016 to 53kt as a result of the contribution from the ramp ups at Bozshakol and Aktogay. Despite the increase in production, revenue of US$302m was down 11% YoY largely due to a 21% YoY decline in average copper prices. Gold production was also up strongly by 143% YoY to 39koz further offsetting weaker copper prices.
Despite weaker grades in the Eastern region down from 2.38% to 2.27% Cu and higher ramp up costs at the new mines, the depreciation of the Tenge, which averaged 86% lower through H1 2016, has had a significant and beneficial impact on costs. Indeed, EBITDA in H1 2016 was up 31% YoY to US$115m and cash cost guidance has been lowered for 2016.
Production guidance has been narrowed to 135-145kt from 130-155kt with the ramp up at Bozshakol set to continue which is crucial to achieving the full year target. Whilst KAZ’s operational performance is currently strong, the earnings outlook likely hinges on the Tenge’s performance, in our view and the stock remains high risk exposure to copper.
Premier Oil (LON:PMO) has announced its results for the six months to 30 June 2016. Operationally PMO performed well, with production flat YoY as it averaged 61kboepd (H1 2015: 60.4kboepd). In addition, record rates of more than 95kboepd were achieved post the period end. This was driven by high production efficiency across its assets, outperformance from the recently acquired E.ON portfolio and additionally the Solan field, which came online during the period and is now set to produce plateau rates. PMO has, therefore, increased its production guidance for FY 2016 to 68-73kboepd.
Revenue for the first six months was US$393.8m (-32% YoY) which is broadly in line with consensus. PMO beat consensus and made a profit after tax of US$167.1m vs loss of US$375.2m in H1 2015. H1 operating costs were US$16.5/boe, 14% below its budget. However, its net debt still stands at a significant US$2.63bn and it remains in discussions with its lenders to ensure it has the financial flexibility to deliver the Catcher project.
With low operating costs and the favourable tax position in the UK from the E.ON assets the Solan field produces important cash flow for PMO to reduce its debt. These results should be well received by the market but PMO’s financial position still lies in the balance. It needs to deleverage and requires an oil price of cUS$50/bbl to do this but we are cautiously optimistic.
Tullow Oil (LON:TLW) has announced first oil on the TEN fields offshore Ghana which has been achieved on time and on budget. TLW estimates the average annualised production in 2016 will be 11kboepd net to the company. A gradual ramp-up in production towards the FPSO capacity of 80kboepd is expected at the end of 2016. This is a significant milestone for TLW.