SB1M er ute med en oppdatering på DNO hvor de hever kursmålet til 23 (22). De skriver blant annet følgende:

"200 kboe/d on the horizon

Conclusion
While DNO’s reported Q4 financials were characterized by major positive one offs due to new revenue recognition principle, the underlying free cash flow was very strong and corresponded to 19% annualized yield. Interestingly, Executive Chairman Mossavar-Rahmani during a lunch presentation at our offices said the company has an ambition of 200 kboe/d production within a few years (+80-90% from today’s level). Following inclusion of the recently acquired Faroe assets in our SOTP valuation and upped Tawke production estimates, we increase our target price to SEK 23 (from 22). We keep buy on the basis of great cash flow outlook, exploration upside in Norway and ambitious growth plans.

Our analysis
- Q4 characterized by new accounting principle and strong cash flow: Based on headline figures, it looked liked DNO reported an extremely good set of Q4 figures with net income of USD 230m, vs our/consensus’ estimates of USD 48/49m. However, the company has changed its revenue recognition criteria from cash principle to accrual principle (like e.g. peer Genel applies), which resulted in USD 183m additional revenue recognition for Q4. The change of revenue recognition criteria does not impact cash flow. Adjusted for this change, net income of USD 44m (SB1 est, not actually reported) was roughly in line with our forecast of USD 48m. Q4 18 free cash flow of USD 111m was well above our forecast, both driven by higher than expected opcf and lower capex. Q4 free cash flow corresponds to 19% annualised free cash flow yield! (=111x4 / 2280). As expected, Q4 showed a healthy q/q production increase due to Peshkabir ramp up. Q4 net production of 91.6 kboe/d was in line with our forecast. Peshkabir (a part of the Tawke licence) is currently producing at an average rate of 54 kboe/d (gross).

- Aggressive guidance: DNO indicated 2019 capex of USD 220m, up from 138m in 2018. Usually, higher capex for DNO has resulted in a rapid increase in opcf, which we believe will be the case this time as well. Including lifting costs and exploration, 2019 “operational spend” (DNO terminology) was guided at USD 420m, up from 293m in 2018. We also note that DNO’s Executive Chairman Mossavar-Rahmani during a lunch presentation at our offices said the company has an ambition of 200 kboe/d production within a few years. That includes the recently acquired Faroe portfolio and implies a growth of 80-90% compared to the current level

- Baeshiqa delayed, could be worth NOK 6-10/share: In October, DNO commenced the drilling of Baeshiqua-1 exploration well. Baeshiqa is an exploration licences in Kurdistan. DNO (operator) and Exxon hold 32% each, while Turkish Energy Company and KRG holds 16% and 20% respectively. The Baeshiqa license contains two large undrilled structures with multiple independent stacked target reservoirs, including in the Cretaceous, Jurassic and Triassic. In addition to the recently spudded well, several wells are expected to follow in 2019. In the Q4 report DNO said the well was drilled to a depth of 1,488 meters and well testing has been delayed by extensive rainfall. Drilling is expected to resume this month (February). No pre-drill volume estimate is announced and valuation of the prospect tis therefore associated with a high degree of uncertainty. However, we know that the license is located in a highly prolific area and a potential discovery probably could be fast tracked. We have included the Baeshiqua license at a conservatively risked value of NOK 0.15/share in our SOTP valuation. However, we do not rule out that Baeshiqa may be the next Peshkabir and see significant upside potential (NOK 6-10/share) if discoveries are made. A few years ago few assigned any material value to Peshkabir, while we now observe that the field is key topic for fighting Tawke decline.

- Faroe asset included in SOTP, target upped: We have included all the Faore fields in our SOTP valuation at 8% WACC. In addition, we increase our estimate for gross Tawke production for 2019 to 127 kboe/d, up from 117 kboe/d to reflect the aggressive drilling programme. We also increase 2019e capex to USD 220m (excluding capitalized exploration) from USD 140m. However, due to increased cost oil pool, the capex increase have immaterial negative impact to our valuation. I total, our SOTP valuation is up from NOK 20 to NOK 23/share. We increase our target price to NOK 23 (from 22) and keep Buy.

Analysts
Teodor Sveen-Nilsen"

I tillegg refererer analytikeren til en lunspresentasjon DNO holdt hos SB1M i dag, hvor det mest interessante (min vurdering) er følgende:

"Baeshiqua could be 1 bn boe: DNO’s 2019 drilling programme in Kurdistan is the most ambitious in the region ever. In our view, Baeshiqa is the most exciting. About Baeshiqa Mossavar-Rahmani said: 1) Exxon never develops a field with less than 400 mmbl of potential (Exxon holds 32% in the licence), 2) results from Baeshiqa are expected during the spring and 3) “the field is likely a billion barrel field”. If the latter is correct, we see some NOK 6-10/share upside potential to our SOTP valuation."