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Broker Roundup: Premier Oil, Ophir Energy, Imperial Tobacco, Xcite Energy, Northern Petroleum, Stratex International, Cupid

Last updated: 17:30 13 Jul 2011 BST, First published: 16:30 13 Jul 2011 BST

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UBS has cut its rating on Premier Oil (LON:PMO) to neutral, arguing that the stock offers little near term upside from exploration and that there is now a reduced likelihood of merger/acquisition activity involving the group.

The move by UBS follows a trading update from Premier yesterday, with the group warning that an unplanned shutdown at its Balmoral field because of a subsea leak means full year production could be as low as 40,000 barrels/day (b/d). It had originally forecast 45,000 b/d.

Investec Securities rates African energy explorer Ophir Energy (LON:OPHR), which had its IPO in London today, as a ‘buy’, setting a target price of 339 pence for its shares.

Investec said that the firm has  a combined net acreage of approximately 90,000 square kilometres, including 65,000 square kilometres in deep water. Partnerships with BG, Petrobras and Noble “underpin” its prospects, according to the independent broker. 

“Africa offers huge hydrocarbon prospectivity and Ophir becomes the UK’s largest exploration-only play,” it said (although there are a number of other firms operating in Africa and are quoted in London, e.g. Aminex, Dominion Petroleum and Solo Oil).

Investec also sees Ophir as a nascent play on the African LNG (liquefied natural gas) industry. Ophir undertook two drilling campaigns in 2008 and 2010/2011 as operator, drilling eight exploration wells, of which five were has discoveries: two in Equatorial Guinea and three in Tanzania. “Both are likely to see LNG developments, we think,” it added.

Imperial Tobacco (LON:IMT) analysts were busy today enlightening the market with their thoughts on the outlook for the stock following the company’s investor day yesterday. While encouraged by Imperial’s ongoing emphasis on organic growth, the analysts caution the strategy is not without its challenges.

Rae Maile, analyst at JP Morgan, says the investor event, titled ‘Unlocking Our Potential’ by Imperial, reinforced the message from the company over the last two years that it is moving from “inorganic growth history to an organic growth future”.

Maile says: “The level of change required through the organisation to deliver this most fundamental of changes in attitude cannot be underestimated. The list of companies in any sector which historically has achieved faultlessly such a move is short. Imperial deserves due credit for making the change; it is arguably overdue. “

Arbuthnot Securities analyst Dougie Youngson reckons the market is very likely to see Xcite Energy’s (LON:XEL) rig update as a major buying opportunity.

The analyst repeated a ‘buy’ recommendation on Xcite Energy(LON:XEL) after this morning’s rig update, in which it toldinvestors that the development plan for the Bentley field remains on schedule as the Rowan Norway deep water jack-up rig is being transported from Singapore to Dundee.

Northern Petroleum (LON:NOP) has got more than enough opportunities to deliver significant value over the next few years regardless of the Italian near-shore drilling ban, according to  Matrix Capital’s oil analyst Vugar Aliyev.

“Overall, the impact on Northern’s core Italian licences is limited,” Aliyev added. “As regards Southern Adriatic, the decree has no impact on the two discovered fields Giove and Rovesti. Slight modifications to the outstanding applications were required, but Northern does not believe there will be any problems with them. 

“There is a minor impact on Northern’s licences in the West of Sicily and the Sicily Channel.” 

Centamin's (LON:CEY) £7.48 million offer for PLUS-listed Sheba Exploration is an endorsement that Stratex International (LON:STI) is exploring in very prospective areas, according to broker FoxDavies.

The broker retains its "buy" recommendation for Stratex targeting a price of 12.5 pence per share (current price: 8.23 pence). Stratex holds a 4.94 percent stake in Sheba and sees the acquisition as a thumbs up for its own prospects in Ethiopia, where it is highly active.

Shares in online dating company Cupid (LON:CUP) have received the seal of approval from Canaccord Genuity, which has set a target price of 258 pence each.

Cupid, whose shares are currently trading at around 227 pence each, owns a clutch of online dating sites aimed at romance seekers in the UK and abroad.

"Cupid offers investors unique exposure to the global growth in online dating (a US$3 billion global market, growing at 10 percent per annum), through a business model that is already delivering exceptional underlying revenue and earnings growth," said Canaccord, which initiated coverage of the share today.

The broker noted that Cupide’s aggressive online marketing strategy – which partly uses cost-effective channels such as Facebook and the company’s own affiliate network – has delivered “strong, profitable growth”, enabling it to deliver organic revenue growth in its coreUK business of more than 70 percent, and even greater growth overseas.

 

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