Canaccord waiting for clarity from Genel Energy on 'next steps'

Analysts at Cannacord Genuity trimmed their target price for shares of Genel Energy ahead of what they termed an important two years as the oil explorer "refines or defines" its rationale.

The broker was referring to the outfit's need to decide on its next steps, whether to expand into other regions, embark on mergers and acquisitions or, absent new investments, to "substantially" increase shareholder returns.

Compounding its quandary was initial production at its Sarta field that had fallen short of expectations and the recent loss of the licenses for the large gas resources at Miran and Bina Bawi.

At a price of $75 a barrel, the outlook for the company's free cash flows on the other hand was positive, with Genel anticipating FCF of about $200m in fiscal year 2022, before dividends, up from an expected $86m in FY 2021.

And every $10 per barrel change in the price of Brent was expected to give it an additional $50m of flexibility.

Year end 2021 net cash was seen at $44m.

"However, we now exclude from our target price any residual value related to the possible retrieval of the Miran/Bina Bawi licences and Qara Dagh until there is greater clarity on the next steps. As a result, we trim our target price to 185p (from 195p) but we maintain our SPECULATIVE BUY rating."