DNO (Hold, TP: NOK16.30) - Strong FCF, worries on reserves
Q1 was hit by sharply increasing depreciation costs, which has negatively affected our EPS estimates, but Q1 operating cash flow (WC-adjusted) was in line with our forecast. We remain slightly worried about the Tawke reserves and the production ramp-up target for Peshkabir. The suddenly increased discount for Tawke oil also highlights the political risk in the investment case, in our view. However, we find the FCF profile attractive in the coming years, and we reiterate HOLD and our NOK16.3 target price.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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