The first week back brought little in the way of news but there was plenty of analyst coverage across the sector.
Gulf Keystone Petroleum Limited (LON:GKP) has been named by Peel Hunt as one of the possible takeover targets for 2017 in the oil and gas sector.
The Kurdistan based oil producer – which was recently rumour to be the subject of Chinese takeover interest - is one of five companies deemed by Peel Hunt to have a sensible mix of asset quality and balance sheet strength.
Others are Serica Energy Plc (LON:SER), Faroe Petroleum (LON:FPM), Bowleven Plc (LON:BLVN) and Toronto listed Africa Oil.
Peel Hunt analyst Werner Riding does, however, note that the market has anticipated merger and acquisition activity in the sector for some time without it materialising. “The widely touted wall of sector consolidation wasn’t a theme we saw much chance of playing out during the most recent downturn,” Riding said.
An improving outlook for crude oil prices is one of the somewhat obvious factors in Royal Bank of Canada’s upgrade for FTSE 100 constituent Royal Dutch Shell Plc (LON:RDSB).
Eyeing improving cash flows, reduced financial risks and post-peak debts RBC moves its rating for the Anglo-Dutch oiler to ‘outperform’ from ‘sector perform’, and a £25.00 price target suggests some 5% upside to the current share price of £23.75.
RBC analyst Biraj Borkhataria, in a note, highlighting the improving conditions for Shell. “Our prior concerns on Shell were centered around a more prolonged period of lower oil and gas pricing, which could mean an extremely tough divestment market alongside weaker organic cash flows,” the analyst said.
“The recent Opec/non-Opec supply deals have effectively provided an environment where we believe this is unlikely.”
Recent rallies mean most oil and gas companies are now trading close to fair value, according to Macquarie, but the broker still tips Hurricane Energy Plc (LON:HUR) and EnQuest Plc (LON:ENQ) for share price success in 2017.
Analyst Kate Sloan, in a note, today downgrades Cairn Energy Plc (LON:CNE), Premier Oil PLC (LON:PMO), Faroe Petroleum plc (LON:FPM), Ithaca Energy Inc (LON:IAE) and Tullow Oil plc (LON:TLW) - all of which are now seen as ‘neutral’.
The majority of downgrades are because of the recent share price strength, though for Premier the analyst is also factoring in lowered expectations for the Solan field.
Arden Partners has a ‘buy’ recommendation for North Sea exploration junior Jersey Oil & Gas Plc (LON:JOG) ahead of a summer well.
The well, which will test the 113mln barrel Verbier prospect, will be funded by partner Statoil and Jersey retains an 18% stake in the asset. It is seen by Arden as one of two key catalysts that can take Jersey’s shares higher.
Arden reckons Verbier is worth 132p (risked net asset value) per share, or 877p unrisked, although it is deemed to be a ‘high risk route to value’ over the next six to nine months. The other possible catalyst relates to the group’s acquisitive ambitions.
With news, LGO Energy PLC (LON:LGO) told investors it has been given the regulatory green light for new drilling at the Goudron field in Trinidad.
The Petroleum Company of Trinidad and Tobago (Petrotrin) and the Ministry of Energy and Energy Industries have now approved LGO Energy’s plan for its first new infill well, to be drilled into Mayaro Sandstone reservoir.
A rig contractor has also now been hired for a programme of at least two wells, and site preparation is due to take place as soon as practicable. That would be followed by rig mobilisation and drilling.
Each well is to be drilled to a depth of 1,250 feet, with the Mayaro Sandstone anticipated between 650 and 1,050 feet, and should be completed within around 14 days.