OKEA (Hold, TP: NOK28.00) - Limited free cash flow until 2027e
Underlying Q1 EBITDA was c6% below our estimate due to higher-than-expected production costs. Following the sanctioning of Bestla, 2024 capex guidance was raised by ~13%, and we expect the development to add >NOK2bn in incremental capex for 2025–2027. Hence, elevated capex will weigh on cash flow, likely leaving FCF negative overall in 2024–2026e. A risk of continued impairments to technical goodwill could also hamper OKEA’s dividend capacity, as distributions are limited to a certain portion of net profit. OKEA is trading at a 25% discount to NAV, which we find fair. We reiterate our HOLD and NOK28 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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