Berenberg lowers target price on Energean

Berenberg stated that the deal was done at a significant uplift from the price that Energean paid for the assets in 2020 of $5.40 per barrel of oil, versus $1.20 in 2020, and was positive on this basis.

The German bank, which has a 'buy' rating on the stock, noted the deal was expected to close by the end of 2024 and should also enable payment of roughly $200.0m special dividend and repayment of $450.0m of bond debt.

However, a lower overall contingent resource base means that Berenberg now models a reduced risked net asset value and price target. It also slightly tempers its medium-term dividend modelling to ensure that net debt/underlying earnings metrics remain on track to reach the company's target of 1.5x, but continue to forecast a healthy long-term dividend yield of 14%.

"Based on our pro-forma numbers, our FY25 production and revenue forecasts are down 27% and 25% respectively, with EBITDA and EPS down 23% and 22%, respectively. FY25 FCF is reduced by 31% and net debt by 9%. Our FY25 DPS is unchanged but is then flat beyond that – resulting in an 18% DPS forecast reduction in 2026 versus our previous forecasts," said Berenberg.

Reporting by Iain Gilbert at Sharecast.com