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With the business potentially at an important milestone, we thought we'd take a closer look at San Leon Energy plc's (LON:SLE) future prospects. San Leon Energy plc, together with its subsidiaries, engages in the exploration and production of oil and gas properties. The UK£162m market-cap company posted a loss in its most recent financial year of US$39m and a latest trailing-twelve-month loss of US$52m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on San Leon Energy's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 2 of the British Oil and Gas analysts is that San Leon Energy is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$78m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 63% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving San Leon Energy's growth isn’t the focus of this broad overview, but, take into account that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. San Leon Energy currently has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
This article is not intended to be a comprehensive analysis on San Leon Energy, so if you are interested in understanding the company at a deeper level, take a look at San Leon Energy's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:
Historical Track Record: What has San Leon Energy's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on San Leon Energy's board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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