OKEA (Buy, TP: NOK41.00) - From dusk to dawn
Built through acquisitions of mid-to-late life assets on the NCS, OKEA’s strategy is to find and extract value where others divest. We find the case compelling, supported by a track record of asset lifetime extensions and short-cycle tieback production potential from ~63mmboe in contingent resources. Its producing assets should generate strong FCF in 2023–2024e, equalling an annual average FCF yield of 28%, which would reduce the residual risk significantly. Coupled with a 12% dividend yield and P/NAV of 0.82x, we find the risk/reward attractive. We initiate coverage with a BUY and NOK41 target price.Okea ASA is a Norway-based oil company engaged in the oil and gas exploration and production industry. The Company contributes to the value creation on the Norwegian continental shelf with development and operation systems through the utilization of the result of previous and ongoing exploration activities in order to bring undeveloped oil on stream in strategic cooperation with service companies. Its services do not involve the exploration for petroleum. The Company operates an office in Trondheim, Norway.
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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