Broker snap: Oil explorers in vogue, says Nomura

6th Jul 2010 10:50

Nomura Securities says oil explorers and producers have been flavour of the month in July, buoyed by a prospective bid for Dana Petroleum and the exploration success in the UK North Sea by Premier Oil."The [explorers & producers] group is discounting around US$64/bbl in our base case NAVs [net asset values] and offering a material pick-up in exploration activity in 2H10 [second half of 2010] - the group is drilling for prospects that could be worth up to 100% of current market valuations over the next six to nine months, led by Cairn (Greenland), Tullow (West Africa) and Soco (Congo)," Nomura analyst Alastair Syme notes.Syme says that industry consolidation is back on the menu and suggests that one of the side effects of the oil spill in the Gulf of Mexico "may be that companies have a higher risk appetite for non-US assets." Nomura's preferred stock in this sector are Premier, Afren and Tullow, all of which the broker feels offer a combination of valuation support and good quality exploration exposure.