Are These 3 Energy Stocks Ripe For Takeover? Amec Foster Wheeler PLC, Ophir Energy Plc And Cairn Energy PLC

Is now the right time to add these 3 energy plays to your portfolio ahead of potential bids? Amec Foster Wheeler PLC (LON: AMFW), Ophir Energy Plc (LON: OPHR) and Cairn Energy PLC (LON: CNE)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Over the course of the last year, shares in Amec (LSE: AMFW) have fallen by 22%, as the weaker oil price has significantly hurt the company’s near-term outlook. However, the impact has been much less than for many of its oil industry peers, with Amec’s bottom line falling by a relatively modest 8% last year and being forecast to flat line this year. And, with growth of 8% being pencilled in for next year, it appears as though the company is managing its cost base highly effectively and becoming more efficient; both of which would be appealing to a potential suitor.

Of course, Amec’s valuation is also very enticing. It currently trades on a price to earnings (P/E) ratio of just 11.2 which, for the quality of the company and its long-term outlook, looks like a steal. As such, a bid for Amec seems to be highly possible.

Ophir Energy

One of the key considerations at the present time for oil companies is their financial standing. That’s because a lower oil price has significantly squeezed revenue and, with the outlook being somewhat bearish regarding the prospect of an oil price rise, the bottom lines of oil stocks are being scrutinised to a far greater extent than when oil was sitting above $100 per barrel.

As a result, Ophir Energy (LSE: OPHR) appears to be rather less appealing than it did one year ago. Certainly, its share price has fallen by 29% in the last year, but it is expected to return to loss-making territory in the current year and remain there in 2016. This is likely to put off potential bidders, since oil companies have become more risk averse in recent months and, while Ophir does have a bright long term future, its negative forecasts for the next two years could hold back potential purchasers from making a bid.

Cairn Energy

It’s a similar story for Cairn Energy (LSE: CNE), with it having made a loss in four of the last five years and being forecast to continue to do so in each of the next two years. However, unlike Ophir, it trades at a major discount to its net asset value despite its shares having risen by 1% in the last year.

For example, while Ophir has a price to book (P/B) ratio of 1, Cairn Energy’s P/B ratio is just 0.55. This means that, while write downs to the company’s asset base are a very real threat moving forward, a very wide margin of safety appears to be built in to its current valuation. So, while it is loss-making, Cairn Energy is dirt cheap and this could cause a bid to be made for it – especially if the risk aversion of oil companies recedes over the medium term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

1 AI stock to buy and hold for 10 years

AI spending's expected to soar in the next decade, according to most experts. Here's one stock to consider buying to…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Dividend deals! 2 passive income stocks that still look undervalued

Royston Wild explains why these FTSE 250 passive income stocks might STILL be too cheap to miss, despite theirrecent price…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

Is BT Group one of the FTSE 100’s greatest value shares?

BT's share price looks like a bargain when you look at the P/E ratio and dividend yield. Is it one…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

The National Grid share price just plunged another 10%. Time to buy?

The National Grid share price is one of the FTSE 100's most stable, and nothing much happens to it? Well,…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 15% in 3 months, but I still won’t touch Vodafone shares with a bargepole

Harvey Jones has been shunning Vodafone shares for years. The FTSE 100 stock is finally showing signs of life, but…

Read more »

Growth Shares

This UK stock could be like buying Nvidia in 2021

Jon Smith thinks he's missed the boat with Nvidia shares, but flags up a UK stock that has some very…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The FTSE 100’s Intertek delivers a bullish update — can the share price soar?

I’d describe Intertek as a quality business with a decent dividend income, but will the share price shoot the lights…

Read more »

Market Movers

Up another 10% yesterday, how high can the Nvidia share price go?

Jon Smith talks through the latest results but flags up why further gains could be harder to come by for…

Read more »