Harbor Energy joined the ranks of the London Stock Exchange last week. With a market capitalization of nearly £ 4bn ($ 5.50bn), the company formed from the merger of Premier Oil and Chrysaor Holdings is now the largest independent oil and gas group on the British stock exchange. Here is what you need to know about it.
Harbor Energy HBR, + 0.70% was born during a time of turmoil for the oil industry. Last year, governments around the world implemented closures and travel restrictions to fight the coronavirus pandemic. Demand for fuel suddenly plummeted and oil prices plummeted. Brent BRN00 crude, -0.63% fell below $ 20 a barrel in April 2020. This dealt a big blow to players like Premier Oil PMOIF, -3.51%. The company, a mid-tier hydrocarbon producer focused on the UK and Southeast Asia, reported a loss of $ 671.5 million for the first half of 2020 alone. Its shares closed at 26 pence on Aug. 20, 2019. day the results were released, having dropped 98 pence earlier in the year. Two months later, as Premier struggled to refinance $ 2.9 billion of soon-to-maturity debt, privately owned Chrysaor swooped in and struck a deal to take over the struggling company. Under a reverse acquisition agreement, Premier shareholders received a 5.45% stake in the expanded group, and Chrysaor, which now owns the newly created Harbor Energy, committed to repay and cancel $ 2.7 billion in Premier debt. On April 1, when it began trading in London, Harbor forecast that its oil and gas production for 2021 would average between 200,000 and 215,000 barrels of oil equivalent per day. Most of it will come from UK North Sea fields that Chrysaor already owned when it took over as Premier. For independent oil and gas companies listed in London, which, unlike large integrated companies like BP BP, -1.46% and Royal Dutch Shell RDSA, -1.65% RDSB, -1.56%, focus only on exploration and production , this is as high as it gets. The production of FTSE 250 MCX, + 0.17% components such as Energean ENOG, + 0.18%, Tullow Oil TLW, -0.21%, Diversified Gas & Oil DGOC, -1.05% and Cairn Energy CNE, -2.57% is considerably lower. Energean has forecast 2021 daily production at 35,000-40,000 barrels of oil equivalent, while Tullow Oil expects to reach between 60,000 and 66,000 barrels of oil. DGO has not provided guidance for 2021, but produced 99,831 barrels of oil equivalent per day in 2020. And Cairn expects to reach between 16,000 and 19,000 barrels per day in 2021, excluding between 33,000 and 38,000 barrels from oil and gas fields in the you are acquiring. Egypt. “Harbor is likely to become one of the go-to names for many investors looking to increase their weight in the sector,” British brokerage Peel Hunt said in a recent note. Oil Price Recovery to Increase Harbor Appeal With oil prices rebounding from last year’s lows, stocks in companies like Harbor Energy look increasingly attractive to investors. Peel Hunt on Tuesday raised his recommendation that Harbor hold from the cut, following an upward revision of his own oil price assumptions to $ 60 a barrel. Analysts at the brokerage now expect Harbor to deliver earnings before interest, taxes, depreciation, amortization and exploration of $ 2.25 billion in 2021 and $ 2.26 billion in 2022. Analysts highlight Harbor’s cash flow-generating capacity as a of your key strengths. The recovery in the price of oil only reinforces this opinion. Barclays analyst James Hosie estimates that Harbor can generate $ 1.1 billion of free cash flow in 2022. “Harbor Energy will provide UK investors with new exploration and production stocks with scale, breadth and balance. necessary to be an attractive investment proposition in what remains a structurally challenging energy subsector, ”he said in a recent note. In addition, the production of Harbor has a low cost. The company’s cash flow balance is between $ 30 and $ 35 per barrel of oil equivalent. The breakeven point for Norwegian peers Lundin Energy AB and Aker BP ASA, by comparison, sits above $ 40, due to their higher capital expenditures and tax costs, Jefferies analysts said in a recent report. A dividend could be on the horizon With low-cost production increased and cash generation improved, the Premier acquisition has created a stronger business, according to Berenberg analyst James Carmichael. This should ensure that the company can achieve its goal of reducing net debt, expanding internationally, and most importantly, initiating a sustainable dividend. In December, Premier Oil said the combined group was expected to generate enough cash to pay a dividend over 2021. With oil prices now $ 10 higher than at Christmas, this seems increasingly likely. Jefferies analysts forecast a distribution of 0.5 cents for this year. Berenberg also sees short-term dividend potential, but expects Harbor’s management to provide more clarity in the coming weeks. More room to grow Harbor has said capex will be $ 1 billion a year. According to Jefferies, this is essentially a maintenance expense to keep production at around 200,000 barrels. But Harbor’s parent company has some experience in making profitable, counter-cyclical acquisitions of oil and gas fields, according to the US bank. “Harbor has a broad set of international growth opportunities, including […] a management team with a history of creating value through disciplined M&A transactions, “the company said earlier this month, noting that it has not ruled out the option of expanding its portfolio through acquisitions. Write to Jaime Llinares Taboada at firstname.lastname@example.org