DNO (Buy, TP: NOK18.40) - Strong Q2, no weak points
Q2 EBITDA was 20% above consensus and 17% above our forecast, primarily due to higher revenues and lower costs. Operational cash flow of USD111m was 22% above our estimate. Annual operational spend guidance was reiterated at USD310m, with a combination of lower capex and higher expex. DNO proposed annual dividends of USD50m, implying a 2.1% dividend yield. The company set a year-end production target for Peshkabir of 50kboed gross, and it has raised its 2P reserve estimate at the field, but without quantifying by how much. We expect a positive share price reaction of 3–5% today, due to the EBITDA beat, the dividend proposal and positive comments on Peshkabir. The Q2 presentation is scheduled for 10:00 CET ().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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