DNO ___ PARETO med nytt kursmål kr 11
Buybacks should bolster recovery - Pareto
After receiving the USD ~100m partial payment for oil exports from Kurdistan, DNO has decided to start a share buyback program to take advantage of the current low pricing. This should provide a good support for a recovery in the share price. We reiterate our BUY recommendation and NOK 11 TP
Solid figures already reported for Q2'11
DNO will publish its Q2'11 report on Wednesday 17 August. However, this morning the company announced the key figures from the report. Revenues were reported at NOK 730m and EBITDA at NOK 565m. While this was well over our estimates, it was a reflection of the earlier announced USD 103.7m payment from Bagdad for the initial export period this year. It was earlier uncertain how this payment would be treated in the P&L, but it has now been decided that everything will be booked to Q2'11. At the end of Q2'11, the company's cash position was NOK 1.2bn, up from NOK 0.9bn at the end of Q1'11, primarily due to the Bagdad payment.
Start up of share buyback program makes good sense
The main reason for the early announcement of the key Q2'11 figures was the recent correction in the share price. The company intends to take advantage of this to immediately start a share buyback program, and needed to inform the market about the Q2'11 results first. With the strong cash position the company has, and the limited capital commitments going forward, share buyback seems like a good way to employ the excess liquidity, especially considering the low share price seen at the moment. The exact timing and size of the buyback program is not yet decided and will be subject to the development of the market. There is however an upper limit of 10% of the outstanding shares regulated by the bond agreements.
Doubling of reserves positions Tawke as a world class field
In July, DNO reported an over 100% increase of the 2P reserves at the Tawke field to 636 mill bbl. This comes after the field has proven significantly better than expected production characteristics after exports started up in February; production has reached 70,000 bbl/day gross. This could also have been higher but is constrained by the processing capacity. The earlier expectation was a capacity of 50,000 bbl/day. Although partly expected, the reserve increase was larger than foreseen, and our valuation of DNO has increased by NOK 2/share to NOK 14/share.
BUY recommendation and NOK 11 Target Price reiterated
While the net asset Value of DNO has increased, we have maintained our TP at NOK 11 as there appears to have been little further progress on the Iraq export payment issue since the initial USD ~100m payment. In addition, the impact of the proposed Merger with RAK is difficult to evaluate as too little information is available for the valuation of their assets. Still, our view is that the current pricing is too low and we reiterate our BUY recommendation.
Buybacks should bolster recovery - Pareto
After receiving the USD ~100m partial payment for oil exports from Kurdistan, DNO has decided to start a share buyback program to take advantage of the current low pricing. This should provide a good support for a recovery in the share price. We reiterate our BUY recommendation and NOK 11 TP
Solid figures already reported for Q2'11
DNO will publish its Q2'11 report on Wednesday 17 August. However, this morning the company announced the key figures from the report. Revenues were reported at NOK 730m and EBITDA at NOK 565m. While this was well over our estimates, it was a reflection of the earlier announced USD 103.7m payment from Bagdad for the initial export period this year. It was earlier uncertain how this payment would be treated in the P&L, but it has now been decided that everything will be booked to Q2'11. At the end of Q2'11, the company's cash position was NOK 1.2bn, up from NOK 0.9bn at the end of Q1'11, primarily due to the Bagdad payment.
Start up of share buyback program makes good sense
The main reason for the early announcement of the key Q2'11 figures was the recent correction in the share price. The company intends to take advantage of this to immediately start a share buyback program, and needed to inform the market about the Q2'11 results first. With the strong cash position the company has, and the limited capital commitments going forward, share buyback seems like a good way to employ the excess liquidity, especially considering the low share price seen at the moment. The exact timing and size of the buyback program is not yet decided and will be subject to the development of the market. There is however an upper limit of 10% of the outstanding shares regulated by the bond agreements.
Doubling of reserves positions Tawke as a world class field
In July, DNO reported an over 100% increase of the 2P reserves at the Tawke field to 636 mill bbl. This comes after the field has proven significantly better than expected production characteristics after exports started up in February; production has reached 70,000 bbl/day gross. This could also have been higher but is constrained by the processing capacity. The earlier expectation was a capacity of 50,000 bbl/day. Although partly expected, the reserve increase was larger than foreseen, and our valuation of DNO has increased by NOK 2/share to NOK 14/share.
BUY recommendation and NOK 11 Target Price reiterated
While the net asset Value of DNO has increased, we have maintained our TP at NOK 11 as there appears to have been little further progress on the Iraq export payment issue since the initial USD ~100m payment. In addition, the impact of the proposed Merger with RAK is difficult to evaluate as too little information is available for the valuation of their assets. Still, our view is that the current pricing is too low and we reiterate our BUY recommendation.
