Coverage Initiated on Oil Company with 'High Growth Ambitions'

Source: Streetwise Reports 01/29/2020

The compelling aspects of this investment opportunity are outlined in a Pareto Securities report.

In a Jan. 20 research note, analyst Tom Eric Kristiansen reported that Pareto Securities initiated coverage on PetroNor E&P Ltd. (PNOR:OSE) with a Buy rating and an NOK 1.3 target price. The current share price is NOK 0.98.

Kristiansen, noting the company has “high growth ambitions ahead,” presented the highlights of the PetroNor story. For one, the energy company “delivered solid production growth” and a 25%-plus return on capital since securing four oil fields in offshore Congo’s Pointe Noire Grand Fond (PNGF) Sud block in 2017. Three years later, these fields are expected to produce 2,400 barrels of oil equivalent per day (2,400 boe/d) net in 2020, a greater than 50% increase, at a lower operating expense of US$12 per boe versus $26. This is due in large part to workovers of existing wells being done at a low cost. Thus, late last year PetroNor increased Proven and Probable reserves there by 28% to 11,200,000 boe.

“We estimate that PetroNor E&P will generate an average annual fixed capital outlay of US$18 million in 2020 to the end of 2022 at Brent US$65 per barrel oil that likely will be reinvested info further growth,” Kristiansen commented.

Also late in 2019, PetroNor engaged in several transactions to pursue overlooked potential on the Aje block in offshore Nigeria and thereby potentially grow the company further. When the Aje transaction closes, it will increase PetroNor’s production base to about 2,600 boe/d from 2,300 and offer further growth potential.

Further, PetroNor has exposure to four disputed exploration blocks in The Gambia and Senegal, which have “a very large, derisked upside potential of 4.9 billion boe gross,” Kristiansen described. The company is working to resolve the issues, for which final rulings are anticipated later in 2020.

Looking forward, PetroNor aims to increase production to 30,000 boe/d over the next three years through mergers and acquisitions. “We expect further transactions to be announced in 2020,” noted Kristiansen. The oil company will continue to invest in workovers, infill drilling and exploration wells, likely funded by cash flow from production, possibly increased leverage and/or new equity.

Kristiansen concluded that “the company today trades fairly in line with our valuation of its producing assets indicating upside potential if PetroNor E&P is able continue to grow production at the PNGF Sud block, successfully revitalize the Aje partnership and/or secure a positive outcome of the ongoing arbitration processes related to the legacy assets from Africa Petroleum (final rulings expected in 2020).”

Sign up for our FREE newsletter at: www.streetwisereports.com/get-news

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures from Pareto Securities AS, PetroNor E&P, January 20, 2020

Opinions or suggestions from Pareto Securities Research may deviate from recommendations or opinions presented by other departments or companies in the Pareto Securities Group. The reason may typically be the result of differing time horizons, methodologies, contexts or other factors.

Analysts Certification
The research analyst(s) whose name(s) appear on research reports prepared by Pareto Securities Research certify that: (i) all of the views expressed in the research report accurately reflect their personal views about the subject security or issuer, and (ii) no part of the research analysts’ compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analysts in research reports that are prepared by Pareto Securities Research.

The research analysts whose names appears on research reports prepared by Pareto Securities Research received compensation that is based upon various factors including Pareto Securities’ total revenues, a portion of which are generated by Pareto Securities’ investment banking activities.

Conflicts of interest

Companies in the Pareto Securities Group, affiliates or staff of companies in the Pareto Securities Group, may perform services for, solicit business from, make a market in, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report.

In addition Pareto Securities Group, or affiliates, may from time to time have a broking, advisory or other relationship with a company which is the subject of or referred to in the relevant Research, including acting as that company’s official or sponsoring broker and providing corporate finance or other financial services. It is the policy of Pareto to seek to act as corporate adviser or broker to some of the companies which are covered by Pareto Securities Research. Accordingly companies covered in any Research may be the subject of marketing initiatives by the Corporate Finance Department.

To limit possible conflicts of interest and counter the abuse of inside knowledge, the analysts of Pareto Securities Research are subject to internal rules on sound ethical conduct, the management of inside information, handling of unpublished research material, contact with other units of the Group Companies and personal account dealing. The internal rules have been prepared in accordance with applicable legislation and relevant industry standards. The object of the internal rules is for example to ensure that no analyst will abuse or cause others to abuse confidential information. It is the policy of Pareto Securities Research that no link exists between revenues from capital markets activities and individual analyst remuneration. The Group Companies are members of national stockbrokers’ associations in each of the countries in which the Group Companies have their head offices. Internal rules have been developed in accordance with recommendations issued by the stockbrokers associations.

This material has been prepared following the Pareto Securities Conflict of Interest Policy. The guidelines in the policy include rules and measures aimed at achieving a sufficient degree of independence between various departments, business areas and sub-business areas within the Pareto Securities Group in order to, as far as possible, avoid conflicts of interest from arising between such departments, business areas and sub-business areas as well as their customers. One purpose of such measures is to restrict the flow of information between certain business areas and sub-business areas within the Pareto Securities Group, where conflicts of interest may arise and to safeguard the impartialness of the employees. For example, the Corporate Finance departments and certain other departments included in the Pareto Securities Group are surrounded by arrangements, so-called Chinese Walls, to restrict the flows of sensitive information from such departments. The internal guidelines also include, without limitation, rules aimed at securing the impartialness of, e.g., analysts working in the Pareto Securities Research departments, restrictions with regard to the remuneration paid to such analysts, requirements with respect to the independence of analysts from other departments within the Pareto Securities Group rules concerning contacts with covered companies and rules concerning personal account trading carried out by analysts.

( Companies Mentioned: PNOR:OSE,
)

Scroll to Top