Analyst Coverage and related media comment

Hmmm... perhaps this (just out on the newswires) has something to do with recent SP weakness - but nevertheless, even in the light of it the reaction seems well overdone to me, considering that most of Dana's output is oil:

ESSEN, Germany (Dow Jones)--E.ON AG (EOAN.XE) expects its first operated natural gas platform will begin production later than originally planned.

The Babbage gas field in the U.K. North Sea will begin production in autumn 2010, E.ON's new Chief Executive Johannes Teyssen told shareholders at the company's annual general meeting in Essen, western Germany.

A company spokesman later said Babbage may start production as early as June, but said it would definitely start operating in autumn at the very latest.

Mark

1208 GMT [Dow Jones] Nomura raises Dana Petroleum (DNX.LN) price target to 1617p from 1484p as it reviews the E&P sector and raises its oil price forecasts. Notes the macro environment remains robust and drilling activity is picking up, with a particular focus on Greenland and West Africa. Nomura also raises Soco International price (SIA.LN) target to 1840p from 1765p and Heritage Oil (HOIL.LN) price target to 629p from 606p. Has reduce rating on Dana, and neutral ratings on Soco and Heritage.

So, with Dana's SP @ 1165p and a target of 1617p, how low does the SP have to be for them to rate it "buy"?

You've gotta laugh.

Mark

Nomura raises its target price on a host of oilcos today:

Dana price target to 1617P from 1484P

A few more comments coming in:

Numis - Hold 1% added to risked NAV. Says it trades at 1.3x core value and 0.9x risked NAV - prefers PMO due to superior near term production growth, valn disc (0.99x and 0.89x) and rising HSFO linked gas prices in Sing (>$13.5/mcf).

Deutsche - Hold 8p added to risked NAV (now 1747p)

Citi - Buy/High Risk 10p to Target (now 1525p). Adds 1% (14p) to Risked NAV (now 1527p).

BoA Merrill have a small comment - believe commerciality for Platypus is almost assured. Expect a 10-15p increase to consensus NAVs to reflect the news. Still rated Buy.

Following Platypus success JPM have issued a note saying they woudl expect the SP to respond positively - they value the well at 38p unrisked.

Reiterates Core NAV as 1558p Derisking Platypus theyir risked NAv moves to 2015p from 1990p previously.

Still rated as Neutral.

Macquarie -1st March 2010 : Target Price 1500p (up from 1400p) upgraded to Outperform from Neutral.

Comments made when price was 1085p.

Reasons for upgrading to Outperform: The recent pullback in the share price and near to medium-term drilling of the Bamboo and Anne-Marie prospects within DNX’s active portfolio of up to 17 exploration wells in 2010.

Solid fundamentals and value: Solid balance sheet, with largely undrawn US$400m facility. DNX is trading at a 27% discount to our core NAV, and looks attractive on reserve and cashflow multiples.

Risks: Exploration failures, production disruptions.

Catalysts: Bamboo exploration well (DNX, 50% interest, 2Q10 results, 19p risked/ 96p unrisked) and Anne-Marie exploration well (DNX, 25% interest, 2Q/3Q10 results, 37p risked/117p unrisked).

 

Just updated the header to incorporate recent(ish) posts on this thread.

Have I missed anything?

The glaringly obvious conclusion from the table in the header is that markets can remain irrational for considerable periods of time.

Here we have loads of analysts almost all of whom think this stocks is very significantly undervalued - and yet the undervaluation persists and persists.

wake me up when things start to move......

Morgan Stanley adjusts price targets on UK oil and gas stocks... says the E&P companies have largely performed in line with the wider European energy group year-to-date. Morgan Stanley adds that after a relatively quiet February, drilling catalysts should return for the group from March onwards. The brokerage...   Cuts Dana Petroleum (DNX.LN) target to 1400p from 1450p; overweight.

...Goldman Sachs ...expressed a preference for FTSE 250-listed E&P Dana Petroleum, which rose by 31p to 1116p. "We believe that at these levels, M&A [mergers and acquisition] speculation should provide a floor to valuation, while the 2010 exploration option is 'free'," Goldman said, moving Dana to "conviction buy" from "neutral", with a revised 1652p target price, compared to 1631p previously...

 

source:- market report

4/2 RBS reduced target price from 1495p to 1400p but maintain BUY rating

Grauniad comment, quoting Oriel - who put the investment case in a nutshell:

We retain our add recommendation and note that Dana's shares are standing at a discount to our risked net asset value whilst Dana has an active near term drilling programme.

....to which I would add the point that M&A potential isn't to be ignored. Dana may not be "flavour of the month" with the City - but that doesn't mean that the industry would take the same view, especially when the assets are patently available very cheaply.

ee

Evo has issued an update maintaining their NEUTRAL stance with a price target = 1050p

Citi has today issued an update saying BUY with a target = 1655p

Bank of America/Merrill Lynch issued a report today 

....upping our NAV by 10p to 1,797p. The stock trades at a

c45% discount, making it one of the cheapest European E&Ps we follow....

Recommmendation = BUY

Price Target = 1,797p

Recent (today?) Meril note out, quoted on Alphaville http://ftalphaville.ft.com/blog/2009/10/13/77406/markets-live/  11.49am : (my bold)

Raising NAV by 266p to 1,706p following asset review - Buy
We take the opportunity to review Dana’s oil & gas portfolio. Whilst, YTD, Dana’s
exploration effort has had mixed results, we believe that the depth of its N.Sea &
Egyptian portfolio, along with the company’s good risk management, continue to
present investors with an attractive risk/reward proposition. In addition, its UK
producing (or near-producing) gas assets could prove extremely attractive to Euro
utilities looking to expand upstream. Reflecting a more constructive view on the
exploration portfolio (+125p), further de-risking the Babbage gas field (+95p) and
a further uptick in volumes (GKA and Ettrick fields, +77p), partially offset by the
recent Trolla dry well (-31p), we raise our NAV by 266p to 1,706p. We reiterate
our Buy on Dana; our new of PO 1,706p (from 1,440p) reflects our NAV changes.

db

In reply to doverbeach (post #15)

....mmmmm....as I pointed out to Edmond on ADVFN re this article's sell rec:

That'll be because the oil bloke at the Chronic thinks that exploration should come "for free"......
.......so if you approach any stock with massive explo upside (such as Dana) with that sort of blind prejudice then you are ALWAYS going to recommend selling when drilling prospects are close [and of course the odds of being "right" are in your favour, even if the scale of the gain from being "right" is vastly smaller than the potential opportunity cost from being "wrong"

 

Trolla spud now overdue...... ;-)
If, of course, Trolla or the other wells actually succeed then the IC will be recommending buying - because it will then be a development project that adds to future earnings.
Verily it is a funny game, this selling low and buying high they go in for over there ;-)

Of course the odds favour the journalist, because most explo wells fail. However, if Trolla should come in then there is a serious prospect of an immediate rise of 25-30% in the shares.......so a smallish overvaluation potentially versus a large upside (ie the usual pre-drill scenario). It is worth remembering, I suspect, that the Trolla well is intended (by Discover Petroleum*) to "prove" their new CSEMI technology.......so I rather suspect that the chance of success may be a bit better than the usual CoS which relies only on seismic.

I'd hate to be a journo having to invent "tips" every week......

ee

ps....* http://www.discoverpetroleum.com/int/sections/technology

Edit: Trolla spudded on 6th Sept : http://www.stockopedia.com/forum/view/27979/dana-investment-programme?comment=42#42

Reuters indicating that Numis have a new sector note out. Premier raised to buy from add; Dana & Melrose to add from hold. (FWIW)

Cheers,

Mark

In reply to shanklin100 (post #12)

... potentially adding 2 and 2 and reaching 5, I wonder if rather than "over-reacting to the interims", the City is reacting to

... DNX seeking to place more shares (at £12.90?)  to acquire some of the oil-related ex-VPC assets from CNA.

Well I'd certainly agree that deals with Centrica are a very strong possibility. However, I'd have thought that they would be more likely to take the form of swaps of assets rather than outright purchases, since Centrica still have appetite to bulk up on the gas side - and have oil assets to trade. Of course the other thoughts are that the RWE rumours might have taken a knock (those rumours having sparked the run-up)  and there may be some institutions keen to take profits rather than stay long into the Trolla drilling?

Perhaps we'll find out soon.

ee

Not sure quite where to post this, but...

... potentially adding 2 and 2 and reaching 5, I wonder if rather than "over-reacting to the interims", the City is reacting to

... DNX seeking to place more shares (at £12.90?)  to acquire some of the oil-related ex-VPC assets from CNA.

All speculation and apologies if on the wrong thread

Cheers, Martin

In reply to doverbeach (post #10)

Somewhat surprising to see the £2 fall over the last 7 sessions (though I did sell a small amount at 1524p to clear an overdraft). My opinion is that the City have backburnered their takeover expectations and have instead chosen to view DNX as having static production and a "risky" exploration profile. There is every chance IMO that this present run of adverse sentiment will overshoot on the downside - just at the time when driling results are coming into view.

Trolla should spud in the next day or two......http://www.stockopedia.com/forum/view/27979/dana-investment-programme?comment=38#38 ......I think the City has been over-reacting to the interims [thanks very largely to their bias towards earnings and cashflow and away from exploration]

ee

Edmund Jackson on Dana  http://www.iii.co.uk/articles/articledisplay.jsp?section=ShareDealing&article_id=10039818

His conclusion, which I suspect many here will agree with:

The sector is cannibalistic, so if Dana was to disappoint at the drill bit and the shares fall, such a scenario could then indeed attract a predator which would not need to pay the extent of premium currently required for control. Shareholders would also be amenable to a worthwhile exit in order to re-invest in other enticing prospects. Not to talk Dana down, but this adds some comfort for long-term investors.

So, although I feel matters are coming to a head here [ie with the drilling program for rest of 2009], with the prospect of more volatility, there are reasons to justify riding it out.

In summary, the shares may have a risk/reward profile of 10% to 20% downside on weak drilling and oil price news, but intrinsically they may be pegged at the current level - or better - in the event of a bid, say if short-term exploration fails to inspire. Yet successful drilling could mean at upside of 50% to 100%. This is a broad brush view but it helps to explain why Dana is at the very least, a priority to watch in the months ahead - with the price now usefully lower, for buyers.

Hi RG,

For completeness of the table in the header, newswires report that Nomura's target price for Dana is 1555p, with "reduce" rating (7th July).

Cheers,

Mark

The Independent says that Nomura is negative on Dana

Nomura also weighed in on the oil exploration & production sector... The broker was less keen on ...Dana Petroleum, down 8p at 1322p, ...initiated with "reduce" ratings. 

 

"We think [second-half] performance will be less about the oil price and more about drilling activity that is beginning to pick up; our two buy rated names, Tullow and Premier, offer good risk-adjusted exposure to this theme," Nomura said, adopting a "neutral" sector view.

 

source: www.independent.co.uk/news/business/sharewatch/market-report-morrisons-stands-firm-on-margins-story-1736246.html

Implies that Nomura think Dana has no drilling going on - which is not my understanding

The Telegraph's Questor Column mentions Dana 7/7

Questor has a buy on a number of companies involved in the energy sector, all of which have good prospects even without another oil price spike.

Of the oil majors, BP... Questor has a buy stance on Tullow Oil, Dana Petroleum, Afren and Venture Production....

 

source: www.telegraph.co.uk/finance/financetopics/oilprices/5769719/Oil-prices-is-there-a-spike-on-the-horizon.html

Nick Louth is a serious PI who writes a regular feature about his own portfolio for the weekend FT.

last Saturday's article mentioned Dana in the following terms

Dana Petroleum is a more modestly-sized company, but is a busy and successful explorer with plenty of funding for its relatively low-cost drilling operations. So, although I am barely breaking even on my near £14 acquisition price, I am confident that this company will yield a profit – either by organic growth or by being taken over.

source: www.ft.com/cms/s/2/09f499c2-6277-11de-b1c9-00144feabdc0.html

According to http://ftalphaville.ft.com/blog/2009/06/30/59701/markets-live/

Citi have upgraded their target price on Dana

...actually they might have done it yesterday, but they reckon it is worth £15.80 a share...and the rumoured offer price is around £18

...Top picks: Dana Petroleum - Buy 1H, £15.80 PT (from £16.20) — Results from
the large onshore Tafejjart gas prospect in Morocco (16p risked, +150p unrisked)
are expected in mid-July with the remainder of the 12-month forward E&A
campaign in Egypt, Norway and West of Shetlands offering c20% risked, c80%
unrisked upside to the current share price. Dana is well financed and discounting
c$52/bbl at present. We believe Dana should prove relatively defensive if the
crude environment rolls over....

Seems to me that it might make sense to contact the analyst at Caz and let them know. This might cause them to published a revised note with the new figures in it causing the shares to be re-rated. Seems like a pretty material mistake to me so worst case they might get it right next time.

Log

They (caz) have also got dana's reserves totally wrong - their table 1.1 shows reserves = 134 million bbls whereas the actual figure is around 200 - which makes rather a large difference to the ratios they calculate.

One relevant bit that leaps out is the fact that Cazenove have a core NAV for Dana of 1742p per share (or 1680p, depending which bit of the note you read! ;-))  For reasons that aren't clear to me, Cazenove do not include risked upside in their NAV assessments at all which seems to me to systemically over-value companies that have few explo assets and under-value those companies with a big explo portfolio [which includes DNX, at least to judge from fig 5.5!]. I'm not sure how well they know Dana though........as they have 2009 production figures of only 29,800 boepd!

rgds

ee

Cazenove published a note on 20th May to initiate coverage of SOCO. Obviously this is predominantly concerned with SOCO, but it does contain information/analysis relating to SOCO's peer group which includes Dana. It seems useful to extract the bits relating to Dana.

I've been struggling to insert a formatted table here, and have run out of energy. Time for bed I think. I'll try again tomorrow.

Bear with me whilst I'm on the learning curve.