Ingenting som tyder på endrede kursmål fra SB1M etter q2 i hvert fall. Kan bli noen fine år for Petronor.

PetroNor (Buy, tp NOK 2.0) – Q2 financials below our forecast (low liftings), 30 kboe/d repeated, low single digit P/E

SpareBank1 Markets AS acted as Joint Manager and Bookrunner for the Q2 21 equity issue

• Q2 21 financials below forecasts: PetroNor reported Q2 21 EBITDA and recurring net income of USD
13.8m and USD 3.9m, below our forecast of USD 17.2m/7.9m. Recurring net income includes
adjustment of FX gain vs. the IFRS earnings. Net cash of USD 2m was roughly in line with our forecast of
USD 3m. However, we note that the free cash flow composition was different from our forecast: opcf
was hit by working capital investments while capex was lower than we had modelled. The reason for
the lower than expected earnings was lower than expected liftings and production. The company said
“Production from the asset during the period was below expectation as a result of required field
maintenance to failing pump equipment”.

• 30 kboe/d ambition repeated: Over the past few quarters, PetrNor has stated a clear ambition of
growing the company to 30,000 boe/d within 2023 (up from ~2,800 in H1 21). That ambition was
repeated in the Q2 report. Going forward, we expect the company to pursue broth organic and in-
organic growth opportunities. We think the company will focus on production and/or developments
close to first oil. More specifically, we expect that Sub Sahara and West Africa are likely areas for M&A
as the company has many years of extensive experience and industry network in that region. We view
the current PetroNor set up as a growth vehicle that is great positioned to execute accretive M&A.

• Two sources for short-term growth: In the short term, we see two key factors for growth: Closing of
the Aje deal in Nigeria and a four-well infill drillin programme at Litanzi. Regarding latter, the infil
program har been delayed by a few months due to covid challenges. The new infill wells will be
completed and brought on stream consecutively from January 2022. The programme will target proven
undeveloped reserves and is expected to increase the field recovery factor from 13% to 27%.

• Low lifting expected in Q3, some estimate earnings moved out in time: In the Q2 21 report, the
company that Q3 liftings will be low due to the lifting schedule. That will probably move some of our
modelled Q3 revenue to Q4 or later. That is purely a timing effect and no production will be lost.

• Low single digit 2021e P/E: Despite the small Q2 earnings miss, PetroNor is trading at 2021e P/E of
around 5x, including the effect of new shares and increased production after PNGF Syd deal closing. As
previously highlighted, that deal was highly accretive with 2P reserves per share up by 16% after deal
and outlook for reduced overhead and G&A costs per barrel of 35-40% after deal completion.