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Europa Oil & Gas (Holdings) plc (LON:EOG): Is Breakeven Near?

Simply Wall St

Europa Oil & Gas (Holdings) plc's (LON:EOG): Europa Oil & Gas (Holdings) plc, together with its subsidiaries, engages in the exploration, development, and production of oil and gas properties in the United Kingdom and Ireland. The UK£4.9m market-cap company announced a latest loss of -UK£654.0k on 31 July 2019 for its most recent financial year result. The most pressing concern for investors is EOG’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for EOG’s growth and when analysts expect the company to become profitable.

See our latest analysis for Europa Oil & Gas (Holdings)

According to the industry analysts covering EOG, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of UK£354k in 2021. So, EOG is predicted to breakeven approximately a few months from now. How fast will EOG have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 67% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, EOG may become profitable much later than analysts predict.

AIM:EOG Past and Future Earnings, March 14th 2020

Given this is a high-level overview, I won’t go into details of EOG’s upcoming projects, though, take into account that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. EOG currently has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which usually has a high level of debt relative to its equity. EOG currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of EOG which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at EOG, take a look at EOG’s company page on Simply Wall St. I’ve also compiled a list of important factors you should further research:

  1. Historical Track Record: What has EOG'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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Europa Oil & Gas (Holdings)’s board and the CEO’s back ground.
  3. 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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