Canaccord Genuity lowers target price on iGas following PM's fracking moratorium

31st Oct 2022 09:25

(Sharecast News) - Analysts at Canaccord Genuity lowered their target price on exploration and production firm iGas Energy from 100.0p to 85.0p on Monday after the UK government reinstated its moratorium on shale gas fracking.

Canaccord Genuity said the PM's announcement in the Commons that the government had experienced a "change of heart" regarding fracking for shale gas, which was quickly followed by a written ministerial statement confirming the decision, had "extremely disappointed" the group.

"While the door to re-open the possibility of fracking is always open, at least notionally, it is clear that there is currently no political will to allow it. To all intents and purposes, UK shale gas is now off the agenda," said Canaccord.

The Canadian bank stated that next steps for iGas "appear to be very limited". However, iGas indicates that it reserves the right to pursue legal processes to recover losses incurred and the analysts highlighted that it was "clearly too soon" to know if or how, and with which other companies, that might be undertaken.

"The combination of very high UK and European gas prices, the possibility of a change of government approach as a result of the conservative party leadership election, and the government U-turns on the matter have resulted in a very volatile market response to iGas. The stock is now back at levels before the recent "shale-mania" took hold, and we believed then, and still do, that the stock was too heavily discounted relative to its peers," said the analysts.

"For now, we remove our small highly risked assessment of iGas' shale gas potential resource from our valuation (15.0p). As a result, we reduce our target price to 85.0p (from 100.0p) and we maintain our 'buy' rating."

Reporting by Iain Gilbert at Sharecast.com