'High Growth Production Ahead' for International Oil & Gas Company

In a July 2 research note, analyst Tom Erik Kristiansen reported that Pareto Securities raised its year-end 2020 production estimate but lowered its target price on Panoro Energy ASA (PEN:OSE; 1PZ:FRA) to NOK 22 per share from NOK 23. Buy-rated Panoro is currently trading at NOK 16.70 per share.

Pareto decreased its target price on Panoro to "adjust for the operator's (BW Energy) new and more conservative estimate of the resource potential of the largest exploration prospects on the [Dussafu] block" in Gabon, explained Kristiansen.

As for the energy company's net production, Pareto expects Dussafu block output to more than double over the next three years due to Phase 2 of the Tortue development and a final investment decision of Ruche and Ruche North East, both expected this year, Kristiansen indicated. Additionally, Panoro also guided to 25% production growth at its Tunisian fields by year-end 2019, "which we find impressive considering that the asset was acquired less than one year ago (with no growth expected)," the analyst added.

Pareto increased its overall production estimates on the company for 2019 and 2020 by 4% and 24%, respectively. This means Panoro could double production to 4,000 barrels of oil equivalent (4,000 boe/day) by year-end 2022 and also reduce opex by 30–40% to $15/boe.

Regarding that anticipated production growth, Kristiansen highlighted that significant potential exists for derisking it as well as for further upside via exploration and appraisal drilling. This is because exploration wells will be drilled, one each, at Hibiscus and Salloum in H2/19. Were the latter well to produce the 1,800 boe/day gross that it did on a short test, it would boost Panoro's production amply and with high value barrels.

Kristiansen concluded that Pareto sees "significant near-term upside as Panoro continues to grow production and prove up more of the exploration potential on its blocks." Also, he noted, "we think Panoro could surprise on the upside with further accretive mergers and acquisitions."

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