BW Energy - Acquires producing assets in Brazil

Increases diversification and presence in Brazil USD 10m initial payment and up to 60m in contingent Financed from existing liquidity and company cash flow

BW Energy - Underlying estimates down despite Q1 beat

Q1 EBITDA beat, but guidance downgrade Lowering ‘22e and ‘23e production estimates Development risks persist – HOLD

Sector Report - Q1 previews and higher oil price assumptions

Key asset HMH well set for market improvement The offshore cycle should be strong enough to lift HMH Material discount to fair value – BUY (Hold) – NOK 12 (7)

BW Energy - Undemanding valuation, but high risk

Estimates up in higher oil price assumptions Focus on ongoing projects HOLD on unfavourable risk/reward

BW Energy - Hibiscus & Maromba on the agenda for ‘22

Q4 was pre-announced We are at the low end of ’22e production guidance Cheap, but uncertainty is high

Sector Report - Crude Quarterly: Higher price assumptions

BW Energy - Decent end to a challenging year

Q4 production higher than expected Minor 2022 estimates changes Production uncertainty remains throughout 2022 - HOLD

BW Energy - Operational issues not resolved - HOLD

Guidance lowered, again Estimates down and reduced confidence Down to HOLD (Buy), as steep discount is justified

Sector Report - Q3 previews and higher oil price assumptions

Dividend likely to be raised at CMD in early ’22 All-time-high revenues in Q3 Share has rallied, HOLD reiterated

BW Energy - Positioned for strong growth

E&P leveraging on BW Offshore’s long track record Fully funded for strong growth We initiate coverage with a BUY, TP NOK 38

Weekly news, topics & discussions

Iraq continues to put pressure on Kurdistan to cut production, while there has been busy US onshore M&A activity, with two large transactions and further consolidation in the market. Exploration drilling activity on the NCS is picking up in the quarter, after activity was postponed in March due to lockdown, with five ongoing wells, with Lundin Energy having several exciting high risk/high reward prospects lined up.

Weekly news, topics & discussions

This week has been about the ongoing strike on the NCS, which has resulted in the shut-in of c330–340kboed of production, c8% of Norway’s total, with potential shut-in of 25% from next week. Another hurricane in the US GoM has resulted in the shut-in of c1.7mb/d, helping Brent prices up 10% this week.

Shut-in production a low risk for Q4

Equinor announced it would have to suspend production on Johan Sverdrup if the strike on the NCS continues until 14 October. However, due to production curtailments and plans for testing higher plateau production, we believe most lost production could be made up later in Q4. Hence, we believe a strike would have only a minor impact on Q4 production, and see the strike already reflected in share prices.

Weekly news, topics & discussions

Brent is down 7% on a larger market sell-off on increased demand concerns related to the resurgence in Covid-19 cases. In a tough week for the majors, Shell’s share price hit an all-time low, and BP’s a 25-year low. In Norway, a fire at an LNG export facility and strike action on the NCS raised concerns about Q4 output. However, for liquids, we believe curtailments will allow volumes to recover in Q4.

Weekly news, topics & discussions

Aker BP announced this week it is offering a total of USD1.25bn notes, which will in our view result in excess cash and could enhance the company’s possibilities for increased shareholder returns and/or M&A. Total this week made more renewable investments, and China has increased its LNG imports.

Weekly news, topics & discussions

Oil prices rebounded from last week, helped by a decline in crude inventories and Saudi Arabia’s continued pressure on OPEC+ compliance, while Nordic E&P equities generally traded sideways. This week the European Commission presented its plan to lower EU GHG emissions by 55%, and estimates that to achieve this, gas consumption should be cut by 25% versus 2015.

Weekly news, topics & discussions

Brent is down 6% this week on larger cuts in Saudi Aramco’s official selling prices on increased demand concerns. Equinor announced a renewable farm-down to BP, implying a value uplift of 10x of its invested capital, which illustrates the major’s eagerness to quickly deploy capital into renewables, but that competition in upcoming rounds is likely to be fierce. Also, reports suggest pressure for production cuts in Kurdistan, putting DNO’s production at risk.

Weekly news, topics & discussions

Following BW Energy’s Q2 report last week, we lifted our NAV to NOK40/share (30) and increased our target price to NOK26 (20), as we see multiple upcoming potential triggers from the re-start of the Ruche development and exploration potential. Elsewhere, Brent prices saw a large drop this week after US EIA oil figures were published on Wednesday while European gas prices continue to rise ahead of the winter season.

Northern Lights

BW Energy (Buy, TP: NOK26.00) - Multiple upcoming potential triggers

Based on likely upcoming lower-risk exploration opportunities, we have raised our target price to NOK26 (20), representing an unchanged 35% NAV discount. The Ruche development re-start is now scheduled for late 2020 after being paused in March. BW Energy remains our preferred small-cap E&P. We reiterate our BUY.