In an Oct. 21 research note, Pareto Securities analyst Tom Erik Kristiansen reported that Panoro Energy ASA (PEN:OSE; 1PZ:FRA) agreed to sell its noncore stake (a 12.2% economic interest) in the Aje field in offshore Nigeria to PetroNor for US$10 million in shares plus long-term upside. "We believe the transaction could unlock significant value and view it as positive for both companies."
For Panoro, Kristiansen indicated, the timing and structure around divesting the Aje stake were ideal.
He noted the positive effects the transaction will have on Panoro. Financially, the valuation impact on the United Kingdom company of the US$10 million in shares is about NOK1.5 per share, according to Pareto's estimate. However, if the natural gas resources at Aje are developed, Panoro could receive up to US$25 million in royalty payments. "Panoro intends to dividend out the shares in PetroNor, which we view as shareholder friendly," wrote Kristiansen.
Finally, for Panoro, the transaction will "free up additional resources that now can focus on Panoro's core assets and potential future mergers and acquisitions transactions, which in our opinion is a significant positive," Kristiansen highlighted.
Pareto has a Buy recommendation on and expects to increase its current NOK23 target price on Panoro Energy.
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Overview over issuers of financial instruments where Pareto Securities AS have prepared or distributed investment recommendation, where Pareto Securities AS have been lead manager/co-lead manager or have rendered publicly known not immaterial investment banking services over the previous 12 months: Panoro.
