From burden to benefit
We remain positive on our large-cap NCS coverage. Based on our expectation oil and gas prices will continue to rise going into 2024, combined with favourable currency movements and much lower cash taxes, we see FCF yields averaging a solid 11–22% through 2023–2025. In turn, we expect this to support increasing dividends in the years ahead from an already attractive level. We reiterate our BUY on Aker BP, Equinor and Vår Energi, and have edged up our target prices to reflect increases to our estimates. Aker BP remains our sector top pick, supported by double-digit FCF yields in its capex-intensive years in combination with an attractive development portfolio and resilient dividend that we believe has room to grow in line with its underlying value-creation through this decade.Aker BP ASA engages in the exploration, development, and production of petroleum resources on the Norwegian Shelf. In addition, Co. has a separate Johan Sverdrup business unit to manage its interest.
Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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