Shares in oil firms Enquest PLC (AIM:ENQ) and Capricorn Energy PLC (LSE:CNE, OTC:CRNZF) fell on Thursday after Jefferies analysts downgraded each respectively in an oil and gas sector note.
“The key variable for exploration and production stock performance is visible, derisked production growth,” analysts at the bank said.
Restraints on such growth at Enquest and Capricorn prompted Jefferies to bump the duo from ‘buy’ to ‘hold’ ratings though, alongside Pharos Energy (LSE:PHAR) PLC, with Tullow Oil also being downgraded to ‘underperform’.
For EnQuest, the downgrade followed declining volumes and a mixed strategy, Jefferies noted.
EnQuest has diversified in recent years, Jefferies pointed out, with decommissioning playing a key role at the likes of the Heather and Thistle platforms off the Shetland Islands.
There has also been an emphasis on infrastructure and other energy businesses, the bank added, such as the operatorship of the Sullom Voe terminal - also of the Shetland Islands.
“EnQuest has delivered production to guidance in both 2022 and 2023 but on declining volumes and overall the stock is down with no direct shareholder return to offset,” Jefferies said.
Struggles getting hold of overdue receivable payments to fuel production in Egypt prompted Capricorn’s downgrade meanwhile, Jefferies explained.
This comes after the firm entered the Egyptian market in 2021 while divesting from its UK production assets, with output guidance having been reduced since.
Shares in Enquest and Capricorn fell 8.1% and 1.2% respectively following the news.