In conjunction with raising their long term oil price assumption (2010 onwards real) to $75 from $65/bbl, Deutsche Bank is offering positive comments for Hess (NYSE:HES). The majority of the effect is to net asset value (NAV) valuations.
According to DB, the mistake the market has made in the case of Hess is to look at the $30 move in the stock price in December and attribute it entirely to their exposure to the Petrobras Tupi. Of course, this was a catalyst, but in reality they believe the bigger issue for Hess has been a snap reduction in their management discount, combining with an NAV driven higher by both oil prices and exploration optionality. Why the reduction in management discount? Because there were two world class oil discoveries last year, Tupi in Brazil, and Mahogany in Ghana. On both occasions, Hess has had adjacent, deliberately obtained, acreage.
The net effect is that if once is lucky, but twice is skill, then discounting Hess's management is no longer appropriate. And at $75 long term, the firm gets a NAV of $100 per share, with no value for Ghana or Tupi, which could add $40+ value..
Firm is raising their price tgt to $110.
Notablecalls: So, assuming $75 oil price, HES is currently worth $100 and that assumes no value for Ghana or Tupi project, leaving additional upside. I suspect this call is major enough to generate strong buy interest in this mo-mo name today.
According to DB, the mistake the market has made in the case of Hess is to look at the $30 move in the stock price in December and attribute it entirely to their exposure to the Petrobras Tupi. Of course, this was a catalyst, but in reality they believe the bigger issue for Hess has been a snap reduction in their management discount, combining with an NAV driven higher by both oil prices and exploration optionality. Why the reduction in management discount? Because there were two world class oil discoveries last year, Tupi in Brazil, and Mahogany in Ghana. On both occasions, Hess has had adjacent, deliberately obtained, acreage.
The net effect is that if once is lucky, but twice is skill, then discounting Hess's management is no longer appropriate. And at $75 long term, the firm gets a NAV of $100 per share, with no value for Ghana or Tupi, which could add $40+ value..
Firm is raising their price tgt to $110.
Notablecalls: So, assuming $75 oil price, HES is currently worth $100 and that assumes no value for Ghana or Tupi project, leaving additional upside. I suspect this call is major enough to generate strong buy interest in this mo-mo name today.
No comments:
Post a Comment