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TICKERS: PEN; 1PZ

Coverage Initiated on Oil & Gas Firm That Has 'Tripled Its High-Margin Production Base'
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A Pareto Securities report outlined the thesis for investing in this London-based energy company.

In a Jan. 23 research note, analyst Tom Erik Kristiansen reported Pareto Securities initiated coverage on Panoro Energy ASA (PEN:OSE; 1PZ:FRA) with a Buy rating and NOK23 (Norwegian krone) per share target price. The company's current share price is about NOK14.65.

Kristiansen provided the story highlights.

First, Panoro continues to expand its base of operations. In Tunisia, it "tripled its high-margin production base to 3,000 barrels of oil equivalent per day (3 Mboe/d) net" with its "highly accretive" acquisition of OMV Tunisia in October 2018, the analyst pointed out.

In Gabon, based on the operator's guidance for Dussafu, phase 2 development should increase Panoro's production by 30%, to about 4 Mboe/d, on average between 2020 and 2023.

Overall, Kristiansen commented, "We expect Panoro to generate US$90M of free cash flow by year-end 2023 at Brent US$70 per barrel that likely will be invested into further growth." Also, Panoro could acquire more assets in Africa, thereby accelerating growth.

Second, significant upside exists for Panoro in the potential results from its development and exploration efforts. The company intends to develop the Salloum, Ruche and Ruche North East discoveries "with tieback solutions to existing infrastructure, reducing costs and increasing the value per barrel of oil equivalent," Kristiansen indicated. "Derisking of developments and mature infill drilling/tieback opportunities may add as much as NOK8 per share to our net asset value over time."

In addition, Panoro intends to drill two exploration wells on the Dussafu block in the 2019-2020 time frame. These, if successful, should "trigger significant share price appreciation," Kristiansen noted.

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Disclosures from Pareto Securities AS, Panoro Energy, Initiating Coverage, January 23, 2019

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