Nostrum Oil & Gas: Delivery a long way off (downgraded to HOLD)
In this report, we have downgraded Nostrum Oil & Gas (NOG) to HOLD (from Buy), with a new price target (PT) of GBp 160/share, down from GBp 404/share previously, implying 14% upside. Driven down by a series of operational disappointments, the delay of the new gas processing unit (GTU3), a grim 2019E outlook and the recent crude oil price weakness, the stock price has fallen 52% since our reinitiation in April 2018. NOG has a tough year ahead, in our view; without the operational delivery in 2019E and a clear long-term outlook, we see limited upside for the current stock price. That said, management presented very conservative 2019E guidance yesterday (27 November), after which the share price fell 19%, and we believe NOG could start delivering positive surprises throughout 2019E. The operational disappointments and the new guidance have been priced in already, in our view. In the coming months, the results at the two new production wells coming onstream in 4Q18E will be crucial, as well as the drilling in the north, and GTU3 unit capex discipline in 1H19E. We no longer see NOG as a growth story in 2019E, but we believe the company can still deliver value to its shareholders, while servicing its debt comfortably.Nostrum Oil & Gas is an independent oil and gas company, engaged in the production, development and exploration of oil and gas. Co. operates three exploration concessions and are primarily conducted through its oil and gas producing subsidiary Zhaikmunai LLP located in Kazakhstan. Zhaikmunai LLP carries out its activities in accordance with the Contract for Additional Exploration, Production and Production-Sharing of Crude Hydrocarbons in the Chinarevskoye oil and gas condensate field for the exploration and production of hydrocarbons in Chinarevskoye oil and gas condensate field.
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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