Genel Energy PLC’s (LON:GENL) Kurdistan oil business is “normalising”, that’s according to Royal Bank of Canada analyst Al Stanton who today dealt a weighty upgrade.
RBC’s rating swings to ‘outperform’ from ‘underperform’, and Stanton’s price target is raised to 200p from 115p – meaning the new target now sees some 30% upside to the current price.
READ: Genel Energy shares rise on new Taq Taq well success
The analyst did, however, deliver his seemingly significant upgrade with a hint of caution highlighting that, with an Iraqi parliamentary election due in May, his current view of Genel should be seen as a trade rather than a “conviction call”.
Nonetheless, Genel shares advanced 2.8% on Tuesday morning to trade at 154.20p.
In a note, Stanton noted that following last year’s management changes at Genel, the company has taken a fresh look at the asset portfolio, with some attention moving away from the Miran and Bina Bawi fields amid a refocussing on certain oil projects.
Stanton highlighted that at the Tawke field, the stakeholders (Genel 25%, DNO ASA 75%) are incentivised to increase production, meanwhile, new production growth at the Peshkabir asset is expected to come through this year (DNO is anticipating 30,000 bopd by mid-2018).
“We expect attention to focus on the 75mmbbl (2P) Peshkabir field's high, $6-9/bbl (PV15%), value barrels, as the participants grow production while seeking to de-risk the 292mmbbl upside (3P) case,” the analyst said.
“In addition, we expect Bina Bawi oil to gain a profile; although estimated to hold 2P reserves of just 37mmbbl, we believe that Genel could exploit the light oil field with its current 100% stake as a tie-back to the underutilised Taq Taq facility; recent field studies for the Bina Bawi PSC may have included an oil development plan.”