Nostrum Oil & Gas: Starting a new chapter (BUY - reinitiation of coverage)
We reinitiate coverage of Nostrum Oil & Gas (NOG) with a BUY rating and a GBp 404/share 12M price target (PT), implying 40% upside. In 2017, the company failed to complete the third train (GTU3) at its gas processing facility before the winter and suffered delays in its drilling programme, leading to major market disappointment. We estimate that NOG has enough time to put the unit into operation in 2018E, to focus solely on production ramp-up and product monetisation. GTU3, which is fully funded in any oil price scenario, should more than double NOG’s processing capacity and improve the company’s negotiating position in the region. We expect NOG to increase production gradually, generating FCF of USD 400m and a double-digit dividend yield in the peak production period. Moreover, its materially strengthened balance sheet should allow NOG to become an active M&A player again, in our view.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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