The value of several North Sea operators could soar this year, according to ambitious predictions made by US investment bank Jefferies.
Shares in the likes of Harbour Energy (LON: HBR), Ithaca Energy (LON: ITH) and EnQuest (LON: ENQ) may double in price in 2023, while Capricorn Energy has also been tipped for modest growth.
Even in base case scenarios, the value of all four operators is forecast to risedespite the impact last year’s controversial UK oil and gas tax changes.
“Recovery” has also emerged as a key theme for Harbour and Ithaca in particular, according to Jefferies.
Analysts working for the American banking giant have compiled a report detailing the outlook for Europe’s exploration and production sector.
Despite the buoyant predictions for UK North Sea players, Jefferies decreases its price targets by around 7%, with 2023 average Brent oil price downgraded by 4% to $93.8 a barrel.
Forecasts for UK NBP gas prices have been cut back by 19% for 2023, to 248p a therm.
Jefferies has left its long long-term commodity price forecasts unchanged from 2025 onwards, with Brent at $70/b and UK NBP at 95p/th.
Harbour
Harbour, the result of a merger between Premier Oil and Chrysar, is the largest independent oil & gas E&P company listed on the London Stock Exchange.
It is also the UK North Sea’s top producer, with flows of around 200,000 barrels of oil equivalent a day (kboe/d), split evenly between oil and gas.
Under Jefferies best case scenario for Harbour in 2023, shares in Harbour could rise to 650p, up from 299p today.
For that to stand any chance of happening, oil would need to trade at around $100, and gas at 300p/t from this year onwards.
In the base case scenario, shares in Harbour are expected to rise to 435p – that includes an adjustment for the net present value (NPV) of the UK windfall tax between 2022-2028.
Jefferies also sees potential further M&A deals for the firm, in addition to “organic growth potential” at North Sea assets, including Catcher and Tolmount.
Harbour also benefits from around $4.1 billion of tax losses, previously held by Premier Oil.
Ithaca
Quickly establishing itself as one of the biggest players in the basin, Ithaca had its IPO in London in November.
In its first set of results since listing, the independent posted pre-tax profits of more than $2 billion, and Jefferies expects it to be “free cash flow generative” every year throughout the windfall tax.
© Supplied by Ithaca EnergyAccording to the bank’s upside scenario, based on the same oil and gas prices as Harbour, company shares could hit 370p – they are currently trading at 173p.
At base case, stakes in Ithaca are backed to rise by 43%, to 245p.
According to Jefferies’ estimates, the operator has “leading Pro Forma 2P reserves life of all listed North Sea producers”.
EnQuest
Following a successful refinancing last year, shares in EnQuest could rise by 180% to 60p this year, in the most optimistic scenario.
Realistically, Jefferies expects company stakes to grow to 27p, or drop to 10p in the worst case.
EnQuest was formed in 2010 out of the merger of Petrofac’s and Lundin Petroleum’s UK businesses- in 2021 it around 54.4kboed.
The company snapped up a 26.69% interest in Cnooc’s Golden Eagle in 2021.
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