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Premier Oil is a ‘top pick’ for RBC Capital which eyes production growth

“We expect Premier’s market performance to be determined by its performance in delivering production and development on schedule"
oil and gas operations
A 180p sees over 40% upside to Premier Oil's current price

RBC Capital has identified Premier Oil PLC (LON:PMO) among its ‘top picks’, with a ‘buy’ recommendation and a 180p price target, which suggests more than 40% upside to the current share price.

On Monday, Premier Oil shares were up 5.8p or 4.9% changing hands at 124.50p.

RBC analyst Nathan Piper, in a note, highlighted value catalysts in the Premier Oil asset portfolio – specifically, the oiler’s collection of field development projects which will in due course deliver production growth.

WATCH: Premier Oil PLC in a strong position to generate significant free cash flow

“We expect Premier’s market performance to be determined by its performance in delivering production and development on schedule,” Piper said.

He added: “The company developed the Catcher field with cost savings already secured. We would expect continued positive share price reaction as the field maintains plateau production through H2/18 with improving uptime.”

Piper also noted that the recently acquired North Sea assets, the Sea Lion field in the Falklands and the Zama discovery offshore Mexico offer further value catalysts.

“Our 12-month price target of 180p is in line with our 199p/share Tangible NAV (excluding Sea Lion),” he added.

The RBC analyst noted that Premier Oil is a leveraged play and as such confidence around oil price recovery is critical to the investment case.

Moreover, it sees more upside should longer term crude prices remain in a positive trend.

“The upside scenario value of 200p assumes the company enjoys the benefits of our upside pricing scenario of $69/bbl long-term for Brent and therefore plans to continue with the Sea Lion development,” the analyst said.

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