Credit Suisse reckons Ophir Energy Plc is worthy of an upgrade to ‘outperform’ even though it is at the same time dropping the target price due to a delayed start-up for the Fortuna LNG project offshore Equatorial Guinea.
The upgrade boosted the London listed share, which was up 4% on Friday changing hands at 68.93p.
Protracted negotiations over financing have seen the project timeline slip – Ophir is now anticipating a deal by mid-December, which would see Fortuna reach the final investment decision milestone some time in the first quarter of next year (previously it was supposed to come before the end of December).
“Project financing is the last remaining hurdle before an FID can be taken on Fortuna,” Credit Suisse research analyst Ilkin Karimli said in a note.
“The partners have been in negotiations with Chinese financial institutions over the last year but negotiations have taken longer than expected, reportedly due to bureaucracy of the process rather than any specific concerns around the project.
“The partners' decision to seek alternative financing options, while continuing negotiations with the Chinese, is a right decision, in our view.”
Any further slippage to the December funding deadline would represent the ‘key risk’ to Ophir’s share price, Karimli said.
“The main catalyst is the mid-Dec update on project financing. Missing this target would increase the probability of yet another delay to the FID and negatively impact management credibility.”
Credit Suisse’s outperform rating comes has a lowered price target of 80p, down from 85p, meaning there’s potentially some 16% upside to the current price of around 69p.