Oil companies were in the spotlight on Thursday thanks to a comprehensive note on the sector from broker Barclays.
North Sea oil producer and explorer EnQuest PLC (LON:ENQ) spurted more than 2% after the broker upgraded it.
The stock rose 0.75p to 36.5p as Barclays said EnQuest may now be through the worst of the oil price downturn without having resorted to equity issuance or asset sales.
The broker said steady operational progress and cost efficiencies had been critical and boosted prospects of management obtaining the flexibility it needs from providers of the US$1.2bn revolving credit facility funding the Kraken development.
It said its valuation and outlook also assumed the company could conclude a sale and leaseback for the EnQuest Producer floating production, storage and off-loading (FPSO) vessel during the second half of 2016, providing a welcome injection of additional capital.
Barclays analysts said in a note: “The stock is trading at a 17% discount to our 42p/share PV15% core net asset value, which appears reasonable relative to peers.
“We are therefore upgrading the stock to equal weight.”
Barclays also upgraded Premier Oil PLC (LON:PMO) to overweight, saying it believed the stock was pricing in a recovery to US$68/bbl by 2018.
Operations during the year-to-date have been ahead of initial expectations with management indicating 2016E net production should be at the upper end of the 65-70,000b/d guidance range.
Barclays said: “Beyond offering investors exposure to further improvement in oil price sentiment, we believe Premier can ease concerns about its funding position in the near term.” Investors were unimpressed, sending the stock down nearly 1% to 77.75p.
But the broker had bad news for Ithaca Energy Inc (LON:IAE) and Genel Energy PLC (LON:GENL), downgrading them both to ‘underweight’.
Barclays said its move on Ithaca reflected the reality that the company was continuing to trade at a slight premium to the broker’s 58p/share core NAV. Shares in Ithaca slid 0.8% to 64p.
It said Genel was still providing exposure to improving payments for oil exports in Kurdistan, with a sustainable low-cost production portfolio.
“However, we believe a rising payment outlook is increasingly priced into the stock and further upside now depends on progress with the company's unsanctioned Kurdish gas development,” Barclays said.
Genel’s stock retreated 0.2% to 145.25p.