TransAtlantic Petroleum (TAT, Financial) ended fiscal 2014 with mixed results. The company did finish 2014 on a good financial note, but its performance declined as compared to the third quarter. It also posted a net loss from continued operations which scared a few investors away. Situations appear grave for TransAtlantic in the future as it is continually losing market share. If we look at the five-year stock performance, the stock has been struggling and is trading at lower levels. The company has to take some bold steps to chop out this situation. Let us have a closer look at the overall business.
Initiatives that will power its performance
The market is fluctuating, and it is troubling the companies to be stable. As oil prices are weak, TransAtlantic is expecting its performance to be at lower levels; still it is now focusing on some other initiatives also to improve its performance and financials. There are key initiatives that the company took in the past that are paying off for now. For example, it has made some impressive acquisitions of several important fields in Albania. These moves are strengthening its asset portfolio, which is expected to provide strength to the company to grow in the future.
Moving on, TransAtlantic has recently established Dadas production. This a solid step by the company towards profitability as this move will greatly expand its perspective production potential in the Northern part its Molla acreage.
Besides these initiatives, the company has some other strategies also that will help it to respond to the challenges it might face due to declining oil prices in the long term. In order to do this, the company has all its hedges in position and it has also paid nearly all of its secured bank debt. In addition, there are other cost reduction moves that are benefiting the company which it is planning to continue in the coming quarters as well.
Smart moves
Moving on, TransAtlantic also has a share buyback program by which it is expecting to generate additional cash in the period when the oil prices are low. In addition, the company is also focused on exploitation of the assets that are expected to improve the results of its known petroleum sources.
TransAtlantic is counting on Thrace Basin, an important asset for it as it is the asset that is least affected by the downturn in oil prices. With a large area under its operation, TransAtlantic is expecting good contribution from it in future.
The company is starting drilling activities in Delvina 34 gas well. It is planning to drill the well to a total depth of 13,100 feet. Further it is planning to carry out testing of it using modern multistage fractured technology. If the test comes out well, the company will think of expanding this drilling activity to other wells in region also.
Conclusion
Now moving on to the fundamentals, the stock is dirt cheap with a trailing P/E of 7.48, but it's quite hard to forecast the earnings in the near term due to weak oil pricing. However, the profit margin of 20.66% indicates that the stock has much room for a good play. It can lead the company to see small improvement in the market share on the back of it. I would like to suggest the investors watch TransAtlantic from the sidelines in the near term and wait for the company to show concrete signs of gaining market share.
