UBS downgrades Genel Energy on gas business concerns
Updated : 10:00
UBS downgraded Genel Energy to ‘neutral’ from ‘buy’ and cut the price target to 400p from 500p, highlighting concerns that an increasingly complex geopolitical landscape is raising the risk profile of the gas business.
UBS said Genel's portfolio can be neatly split into two: an oil business and a gas business.
The bank said there appears, after some delay, to be a tentatively workable oil export payment mechanism, with the Kurdistan regional government having made two monthly payments to contractors.
UBS said this should see Genel's cash cycle move positive through the second half of the year.
On Tuesday, Genel said it received total payments of $45m from the Kurdistan regional government, having suffered payment delays for years as it got caught up in a revenue-sharing dispute between regional authorities and Iraq’s federal government.
“However, to see decent upside in the stock one needs unwavering confidence that firstly, oil payments ramp-up smoothly; and, secondly, its unsanctioned 8.4TCF Miran/Bina Bawi gas export project will progress to plan.”
The bank pointed out that this is Genel's key growth asset and biggest by value.
At 0936 BST, Genel shares were down 4.4% at 302.50p.