Talisman has told Petroleum Safety Authority Norway that the Yme platform off Norway could collapse if cracks in the structure are not repaired before winter, Teknisk Ukeblad reports.
Although Lotos impaired the majority (roughly PLN 1.18bn or 79% of the book value) of the asset, the collapse of the platform and the subsequent delay of production could leave Lotos facing a further loss, perhaps to an amount that will virtually wipe out the current carrying value of the asset. While at this stage the news would seem to be a warning rather than a reflection of reality, it suggests that repair works may not be progressing with the desired speed. In our view, Lotos’ current share price (PLN 32.7 per share) and valuation (2012-2013F EV/EBITDA of 8.2x and 6.8x; some 50% and 40% above peers) does not discount the negative developments at Yme. In fact, it seems that (temporarily) strong refining margins have made investors overlook Lotos’ inability to show near-term (and maybe even medium-term) organic growth.