In a Feb. 23 research note, analyst Tom Erik Kristiansen reported that Pareto Securities raised its target price on Panoro Energy ASA (PEN:OSE; 1PZ:FRA) to NOK30 from NOK21 because the full accretive effect of the company's recent acquisition is yet to be realized. Panoro's current share price is NOK18.
Kristiansen highlighted the benefits of the transaction to the Norway-headquartered oil and gas company, a Pareto Securities Top Pick in the exploration and production (E&P) space.
One, its recently acquired producing assets from Tullow will increase Panoro's production fourfold, to 9,400 barrels of oil per day (9.4 Mboe/d) this year. Production is expected to grow another 30% to more than 12 Mboe/d in 2023 and 2024. The new Ceiba and Okume fields (14.25% working interest) in Equatorial Guinea and the Dussafu block (10% working interest) in offshore Gabon boosted Panoro's Proven and Probable reserves threefold, to 39 million barrels.
Two, this additional production will increase Panoro's free cash flow by 12% this year and 35% between 2022 and 2024, as estimated using a Brent oil price of US$60 per barrel.
"We find this highly attractive and believe Panoro can pay out a dividend yield of 20% or more post first oil at Hibiscus (Q1/23) while still investing in further growth," Kristiansen highlighted.
Also of significance, the analyst wrote, Panoro is expected to be fully financed down to a US$30–40 per barrel Brent oil price.
"This includes US$76 million of amortizations (about 35% of market cap) that adds further upside to our dividend/growth assumptions as Panoro's growing production base should remove the need for debt reductions," noted Kristiansen.
Looking forward, Pareto expects Panoro to concentrate on dividend distributions and additional strategic acquisitions.
The investment bank has a Buy rating on the E&P.
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