At just £13.1m, it doesn’t have a large market capitalisation but Aberdeen-based The Parkmead Group (LON:PGM) does have some interesting potential.
It is an independent energy group focused on growth through gas, oil and renewable energy projects.
As at 31 December 2023, the group had £15.4m of net assets of which £9.2m was held in cash, £0.2m of which was held as restricted cash.
The Business
The Parkmead Group is a UK and Netherlands focused independent energy group.
It produces natural gas from a portfolio of four fields across the Netherlands and holds significant additional oil and gas interests across the UK and Dutch sectors, spanning its 21 exploration and production blocks under licence.
The group holds interests in a portfolio of exploration prospects alongside leading international partners.
It also 100% owns and operates the Kempstone Hill wind energy company, producing electricity direct to the UK grid.
Additionally, it has a range of complementary renewable energy opportunities within its group interests.
The company is continually expanding its portfolio of high-quality assets covering the three main areas of E&P operations – exploration, development and production.
It has significant development opportunities across the UK and Netherlands, including the Fynn Area in the UK Central North Sea and several onshore developments in the Netherlands.
The company’s Management is evaluating further acquisition opportunities in each of its core areas of activity – renewables, gas and oil – and is focused on targets which are immediately cashflow accretive or where it can utilise its own in-house technical expertise to create significant value.
The business continues to progress the Skerryvore project, and good progress has been made on well planning, site survey contractor selection and the identification of long lead items, with offshore surveys scheduled to take place in H2/24 to deliver the planned well in early 2025.
Parkmead has been provisionally awarded three new offshore blocks by the North Sea Transition Authority; the new award contains seven undeveloped discoveries, the largest of which is Fynn Beauly.
Management Comment
With the Interim Results announced in March, Executive Chairman Tom Cross stated that:
“I am pleased to report strong operating performance achieved byP arkmead in the six-month period to 31 December 2023, despite lower gas prices.
The excellent production rates from our onshore Netherlands gas fields have allowed Parkmead to return to profitability, setting a base for future success.
The stable electricity revenue generated by our Kempstone Hill wind farm, against a backdrop of falling international gas prices, demonstrates the importance of our strategy to continue growing our renewable energy income sources.
We are continually reviewing both development and operational asset acquisition opportunities to increase the breadth and scale of our portfolio, as we aim to deliver our goal of 50% of Group revenues from renewable assets.
Parkmead is committed to playing its part in the energy transition, through its growing renewable projects. In parallel, we are continuing to maximise the value of our full cycle E&P business.
We were delighted by the successful award of the Fynn area Licence in the 33rd round and are making good progress towards our operated exploration well at Skerryvore.
The Parkmead team is working hard to deliver this project over the coming year.”
The Equity
There are some 109.3m shares in issue.
The largest holder is Chairman Tom Cross with 25.84% of the equity.
Other larger holders include Stonehage Fleming Investment Management (11.24%), Hargreaves Lansdown Asset Management (4.72%), Polar Capital (2.70%), Bank J Safra Sarasin (2.11%), Investec Wealth & Investment (2.02%), Alexander Kemp (1.87%), David Mills (1.62%), HSBC Global Asset Management (1.03%) and Mattioli Woods (1.00%).
Analyst View
Jonathan Wright at Cavendish Capital Markets has a 50p Price Objective on the group’s shares.
For the year to end June he is estimating that sales will have fallen to £6.3m (£14.8m) while adjusted pre-tax profits could well have been hit by sharp gas price declines at £2.0m (£10.6m).
He notes that the Skerryvore exploration well plans are progressing apace, that its renewable asset development opportunities are being matured, while the new UKCS awards have materially boosted the group’s resource base.
My View
Two years ago, this group’s shares were flying at around 67p, they are now on their 5-year Low of just 12p.
Despite its various hassles of late, the group has a mass of resource value and a substantial pile of cash in the bank.
Its Management has continued to attend to its strategy of growth through acquisition of cashflow accretive targets in each of its core activities – renewables, gas and oil.
On pure earnings terms the shares are expensive, however, the group offers big turnaround potential and the shares, now on their bottom, look to be an interesting gamble.