Davy Research

Davy Morning Equity Briefing


Market Comment

Eurozone PMIs might disappoint expectations

This morning’s flash eurozone PMIs are to be broadly unchanged in August, according to consensus, but the out-turn might disappoint expectations if earlier surveys prove instructive. Yesterday’s ZEW survey revealed that investor sentiment was much lower than expected in Germany and the eurozone in August. Whatever the outcome today, the eurozone economy has been on a strong run in 2017 and the PMIs should signal that growth in the currency block continues to outpace that in the UK and US economies.


Premier Oil

Good bitesize deal

Premier Oil announced late on August 22nd that it has agreed to sell its 33.8% interest in the Wytch Farm oil field for a $200m cash consideration. This valuation is ahead of that implied from a July transaction for equity in the field and is in-line with our valuation of the group’s interest in Wytch Farm.


EnQuest

Reduces production guidance

EnQuest has reduced its FY2017 production guidance by an average of 23%. The reduction in production guidance relates to the prolonged ramp-up of the Kraken field, specifically issues relating to the Floating Production Storage and Offloading (FPSO) vessel. Reservoir performance at Kraken is reported as good and management expects to reach plateau production in H1 2018. We retain our ‘Neutral’ rating on the stock.


Eland Oil and Gas

Opportunity still exists – even if it’s a more sedate ‘life at 50’

Our view of Eland, an E&P stock operating in Nigeria, remains unchanged. It has a substantial, relatively low-risk inventory of subsurface oil and gas development opportunities together with a number of topside issues that must be carefully managed. Progress is being made, albeit slowly at times, but the next couple of years could see a marked change in the pace of development. Achieving stable production volumes is especially important as it provides a platform for organic growth and proves the investment proposition. At an oil price of $50/barrel, the investment case still works – albeit the production requirement is even stronger.


Independent News & Media

H1 results in line; net cash of €95m; FY on track

Independent News & Media (INM) has announced H1 2017 results that are in line with recently revised numbers while full year guidance (circa €30.0m EBIT) is maintained. While the group’s faster operational slowdown should not be ignored, INM's net cash position of €95.7m (63% of its current market cap) is likely to remain a key area of investor attention. Directors state that no dividend is proposed for 2017. With regard to the independent review, which INM has now received, the company commented that "The subject matter and recommendations from the independent review are currently being considered by the Board".