Berenberg ups Harbour Energy to 'hold' after shares drop

Berenberg upgraded Harbour Energy to 'hold' after a decline in the company's shares brought the oil and gas group's valuation in line with the broker's price target.

Upping its rating from 'buy', Berenberg left its 20p share price target and forecasts unchanged.

Harbour was formed from the $3bn acquisition of Premier Oil by private equity-backed Chrysaor to create what is billed as the UK's biggest listed independent oil and gas company. The new company's shares started trading on 1 April.

Harbour has good cash flow that is the basis for debt reduction, international growth through acquisitions and starting a sustainable dividend, Berenberg said. Net debt will drop to about $2.4bn at the end of 2021 from £3.2bn at the time of the acquisition and the dividend will start with a conservative yield of 1-2% with scope to grow in the long run, Berenberg added.

"We upgrade to 'hold' following recent share price weakness which means the company is now trading broadly in line with our price target," Berenberg analyst James Carmichael said in a note to clients. "We make no changes to our forecasts and continue to believe that Harbour's low-cost production and strong cash generation provide a strong platform for international growth and near-term income potential."

Harbour shares fell 4.6% to 19.08p at 11:34 BST.