DNO (Buy, TP: NOK13.10) - Q3 dominated by non-cash effects
Q3 was a messy quarter and we have lowered our 2018–2019e EPS on the back of increased DDA/boe costs at Tawke. However, the increased costs has no cash effect and we still find the medium-term risk/reward attractive, with our NAV-based target price at NOK13.1, our bear-case fair value (with conversion of PSCs to TSCs) at NOK6.7 and our bull-case fair value (with Peshkabir being successful) at NOK17.9. Media reports indicate that the next Tawke payment might be announced shortly, which would come as a relief amid high geopolitical tension. We reiterate our BUY recommendation.DNO is a Norwegian exploration and production company focused on the Middle East and North Africa. Co. holds stakes in oil and gas blocks in various stages of exploration, development and production, both onshore and offshore, in the Kurdistan region of Iraq, Yemen, Oman, the United Arab Emirates, Tunisia and Somaliland.
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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