BUY Harbour Energy – Update, -9% ABS – Share Consolidation

We are adjusting our target price due to the 1 for 20 share consolidation on Friday – our adjusted price target (inline with our previous price target) is 800p which leaves a +100% upside while our comp valuation comes in around 1000p which leaves a +150% upside – our Blue Sky valuation comes in at 1600p.

The set of numbers released last week were widely inline and did not change the previous views of analysts. Given the cash flow generation of the company we expect a dividend to be announced later this year – and/or – potential for M&A in case they find assets at a bargin.

We believe the recent lackluster price action to be a result of near term catalysts having moved further towards 4Q.

We continue to like oil in general, especially as we are seeing the re-opening progressing and also expect to see an energy crisis developing due to the drive to be carbon neutral – we see HBR as a cheap way to play this.

We are currently down -9% on the trade post weakness after the consolidation on Friday.

BUY Harbour Energy – Update – MS note out on HBR LN. One of our favourite names in our oil theme is Harbour Energy

Wednesday • 02 June 2021 • 10:32

Harbour Energy Has Many Attractions, Morgan Stanley : They have it as EW but at PT of 26p and they have a bull case PT @ 35p. Both work for us.

With Oil now holding above 70USD i would expect another leg higher once that becomes support. Oil continues to be one of the best places to invest for us as no new supply is coming as all the majors are re aligned their portfolios on the ESG/carbon neutral tact under investor pressure. The smaller players will continue to pick up cheap assets as the majors divest and the oil price heads higher.

Vertex Energy deal last week is a prime example as shares more than doubled on its plan to buy a Mobile, Ala., refinery from Royal Dutch Shell for $75 million= 91,000 barrels a day.

Harbour is in a prime seat and we expect new deals for them soon as part of their expansion strategy outside North Sea assets and their continued harvesting FCF from their current assets.

We are currently +8.78 % on the trade and happy to add.

BUY Harbour Energy– Premier Bulked Up is the name to own in the sector, +120% upside

Wednesday • 14 April 2021 • 17:20

TP 50p leaving a +120% upside, Blue Sky +300%

Harbour was listed on the 1st April as part of Chrysaor Holdings reverse takeover of Premier Oil (PMO holders got around 5% of Newco effectively) and is now the largest UK listed independent oil and gas company with a strong management team behind it that can push for further growth

As part of the deal Newco will wipe out USD 2.7bn of debt held by Premier – Newco will leverage on the scale and diversification as well as further synergies

Due to the debt burden in the past creditor flow-back has been a worry within the name. We believe this along with limited analyst and index coverage creates a nice entry level. We are also bullish on cyclicals and are looking for pockets of value in oils,miners and autos. Harbour fits the bill. (See thoughts on http://monacoalpha.com/ideas/current-mkt-thoughts-the-worm-is-turning/)

Just under 20% of the shares in issue were issued to creditors, these of course have lock ups etc and we therefore estimate that of the >1bn shares that have traded so far the majority of the selling is complete

Newco is highly cash generating with USD 1bn in FCF based on spot or a >20% FCF yield given the USD 5bn market cap

Unlike the bigger integrated players, Harbour only focuses on exploration and production with one of its key strength being cash flow generation with Barclays pointing to its cash flow break even around USD 30-35 per barrel while the peers are >USD 40

We expect the strength in cash flow generation to lead to a decent dividend when Premier’s debt issue is reduced and the USD 1bn in capex is covered – also international expansion and M&A could help further growth especially given the number of oil & gas asset sellers in the market which Harbour is in a position to capitalize on

Index wise we expect Harbour to join the FTSE250 in the June review – based on current number we estimate that if they reach 30p then they stand a chance at the FTSE100

Peel Hunt has pointed out that Harbour likely to become a go to name for many investors looking for sector exposure

Valuation wise our DCF comes in at 40p which leaves a +100% upside while our comp valuation comes in around 50p which leaves a +150% upside – our Blue Sky valuation comes in at 80p