Berenberg lowers target price on Kistos following Greater Laggan acquisition

Analysts at Berenberg lowered their target price on exploration and production firm Kistos from 530.0p to 455.0p on Tuesday but said a recent accretive acquisition would provide the group with "material cash flow".

Kistos announced the acquisition of an interest in the Greater Laggan Area from TotalEnergies on Monday, a move Berenberg sees adding roughly 85% to pro-forma 2022 production and about 33% to the company's reserve base.

However, the German bank also said results of Kistos' Q11-B appraisal were also announced and came in "significantly below expectations", with the main reservoir water-wet, although it acknowledged there was "some encouragement" in two shallower horizons.

"The net effect of our changes is a 15% reduction in risked NAV to €494.0m, or 497.0p per share (from 583.0p per share). We continue to exclude the M10/M11 assets from our price target, which is now set at 455.0p (from 530.0p) – offering circa 20% upside from the current share price – and we retain our 'buy' rating," said the analysts.

"On our updated forecasts, the shares are trading on FY 2022 EV/EBITDA of 1.5x, EV/DACF of 2.2x and an FCF yield of 40% (or 12% once adjusting for the GLA consideration)."