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On Monday, EnQuest Plc (ENQ:LN) (OTC: ENQUF) received an upgrade from Jefferies, with the firm's analysts changing the stock's rating from Hold to Buy and increasing the price target from £0.12 to £0.15. The upgrade follows a revision of EnQuest's full-year 2024 production estimates, which were lowered by 3% to 40.5 thousand barrels of oil equivalent per day (kboe/d) after an unplanned outage at the Ninian Central Platform in early November impacted production at the Magnus field, which is expected to account for approximately 36% of the company's production for the year.
Despite the production adjustment, the company's UK operations are anticipated to benefit from full capital allowances under the UK's Energy Profits Levy (EPL) following the October 2024 UK Government Budget. However, the planned 2025 drilling program at the Kraken field, in which EnQuest has a 70.5% working interest, has been postponed and rescheduled as part of a broader drilling program set for 2026.
Meanwhile, EnQuest's ventures in Malaysia have shown positive developments. The company has secured an agreement to develop an additional 155 billion cubic feet (bcf) of gas at the Seligi field, where it holds a 50% working interest. Additionally, EnQuest has been awarded a 42% participating interest in a Small Field Asset Production Sharing Contract (PSC) over the DEWA Complex Cluster offshore Malaysia, in partnership with Seascape at 28% and PSEP at 30%. The DEWA Complex Cluster is estimated to contain about 500 bcf of gas initially in place (GIIP), equivalent to roughly 83 million barrels of oil equivalent (mmboe).
The analyst noted that the lower net debt projected at the end of 2025, which is estimated at $339 million compared to $454 million at the end of 2024, contributes to a 24% increase in the company's net asset value (NAV) to 22p.
The valuation based on enterprise value to EBITDA (EV/EBITDA) is even more favorable, with a 69% increase to 11p after accounting for one less year in the UK EPL net present value (NPV) offset, now extended to 2026-2030, and a reduced debt estimate of $320 million. The analyst stated, "Using an average of both these methods, our price target is +27% to 15p, and we upgrade to Buy from Hold."
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