Tullow (+2.4%) rises most since April after BofAML raises to buy; EnQuest (+3.4%) also rises with upgrade to buy at BofAML.
- Ophir down as much 3% after cut to underperform vs buy; PT cut 16% to 240p
- Says Tullow, Enquest both making progress towards positive FCF over next 18 months; notes shares at 6, 2-year lows, respectively
- Sees Ophir as overleveraged to “fickle” farm-down market as it undergoes strategy shift
- DNO, Dragon top picks on cash flow, growth
- Sees DNO as discounted vs pre-Islamic State levels as Tawke ramps up; main catalysts after Western campaign against extremists to be cash receipts for exported crude, alternative marketing arrangements
- Dragon’s $1.9b cash pile offers scope for cash returns; likely to complete 10-12 wells in 2H, will be drilling in more productive part of reservoir
- EnQuest (PT cut 7% to 140p) trading at discount due to disappointment over Alma-Galia startup delay, risk on Scotland vote; both risks subsided, factored in with shares at 50% to European E&P peers on 2015 ests. for P/E
- BofAML says farm outs not generating shareholder value currently; of 5 “sizeable” farm outs in past 2 years, average share price drop has been 7% over subsequent 3 months, citing Salamander (Thailand), Ophir (Tanzania), Rockhopper (Falklands), Petroceltic (Algeria), Heritage Oil (Iraq) deals