Crude Quarterly Q3'24: Lower oil price

Oil inventory draws for the rest of 2024. IEA is wrong – peak demand is not imminent. Both E&P and oil service shares look highly attractive.

A potential game changer - up to BUY

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Mixed risk for dividend cuts

Following the recent sharp oil price drop to ~USD70/bbl, we see increased investor concerns about the robustness of shareholder distributions. Historically, disappointments related to dividends and/or buybacks have triggered meaningful negative share-price reactions. For our large-cap NCS coverage, we believe oil prices would have to move below USD60/bbl for any negative surprises to unfold for Aker BP and Equinor, as both have strong balance sheets, enabling dividend flexibility. On the other h...

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Weekly news, topics & discussion

This week, we published an update on DNO, seeing significant value potential from its Norwegian portfolio. As one of the most successful NCS exploration companies in recent years, the company has discovered net resources of ~135mmboe. In other news, we upgraded Aker BP to BUY (HOLD), viewing its recent underperformance as an attractive entry point. Also, a gas market update with Equinor left us slightly more bullish with regards to the near- and long-term gas market outlook.

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Weekly news, topics & discussion

This week, the Aker BP-operated Tyrving field commenced production ahead of the planned start-up in October. In other news, Vår Energi completed the divestment in the Norne area to DNO; adjusting for cash flow between the effective transaction date on 1 January and close on 30 August, DNO paid a net cash consideration of ~USD24m. Also, BlueNord reported August preliminary production of 27.0kboed. Adjusting for the Harald fiel

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Valuation update

In this note, we show updated valuation statistics for the E&P sector

Weekly news, topics & discussion

This week, we updated our oil and gas price assumptions. We see a softer oil market balance than before and have lowered our oil price assumptions. For gas, we have raised our assumptions based on increased geopolitical risks. Accordingly, we have updated our company estimates. Despite outperforming Equinor and Aker BP by ~25% YTD, we have kept Vår Energi as our top sector pick.

OKEA (Hold, TP: NOK23.00) - Struggling to identify any near-term share...

We have cut our near-term oil price estimates given the softer oil market balance than we expected but have raised our gas price assumptions on increased geopolitical risk. We forecast negative FCF for 2024–2026, and see downside risk to Statfjord production estimates. Thus, we struggle to see any near-term catalysts, and believe the stock is fairly valued. We reiterate our HOLD and NOK23 target price.

Strong NCS production in July

The Norwegian Offshore Directorate’s (NOD) preliminary NCS figures for July showed strong liquids production of 2,079kboed (6.2% above forecast) and gas production of 360mcm/d (12.3% above forecast). Overall production was 4.35mmboed, up 5% MOM (9.3% above forecast). Company-wise, production was up MOM for Equinor, Vår Energi and OKEA, but down for Aker BP and DNO. With the Q2 reporting season complete, the NOD’s field-by-field breakdown should be well known.

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Weekly news, topics & discussion

This week, we published a Q2 survey on our US shale universe. Production guidance saw limited estimate revisions, and is still expected c4% higher YOY, while capex is expected to be flattish YOY. In other news, DNO released its Q2 report, with figures broadly in line with consensus. Due to its solid balance sheet, the company decided to increase its quarterly DPS by 25%, from NOK0.25 to NOK0.3125. Also, Equinor won a US offshore wind lease auction, securing a long-term development option for a b...

Valuation update

In this note, we show updated valuation statistics for the E&P sector

US shale: Significant overspending in Q2 and limited production growth

Our Q2 survey of the US shale universe showed limited revisions to guidance for 2024, and we still expect muted 2024 production growth of ~4% YOY (+8% YOY in 2023). Our survey also suggests capex down ~1% YOY, as the companies continue to guide for flat activity. For Q2, our universe spent 120% of its operating cash flow as net debt continues to build across the industry.

Weekly news, topics & discussion

This week, Panoro Energy and DNO released Q2 trading updates. Panoro Energy reported slightly weaker-than-expected net production at 8.7kboed, leaving downside risk to the 2024 production guidance. However, we see H2 production trending up, leaving the company well placed for significant FCF generation in 2025–2026e (FCF yields of 35–40%). For DNO, gross production from Kurdistan was fairly in line with our estimate, while North Sea production was slightly better. In other news, BlueNord reporte...

Valuation update

In this note, we show updated valuation statistics for the E&P sector.

Weekly news, topics & discussion

This week, BW Energy’s Q2 trading update showed net production of 23.5kboed, just below our 23.7kboed estimate (no reliable consensus). Production at Dussafu was slightly above our estimate, while Golfinho was just below. Following delivery of the new conventional electric submersible pumps (ESPs) and the drilling contract extension until February 2025, we believe the partners are well positioned to reach plateau production at Dussafu into next year. In other news, the ramp-up of Tyra is likely ...