Harbour Energy PLC          

Harbour Energy PLC (LON: HBR) is an FTSE 250 listed entity that came into existence post an all-share merger between Premier Oil and Chrysaor. The new entity is regarded as the biggest oil and gas producer and replaced the LSE listing of Premier Oil PLC from 1 April 2021.

Investment Rationale – Watch at GBX 412.00

• Recent Updates: On 30 December 2021, HBR completed the drilling of the Dunnottar exploration well in licence P2399 in the UK North Sea. Also, in the last capital markets day update (released on 9 December 2021), HBR guided that it expects to produce 195-210 kboepd in FY22.
• Downtrend Production: The Company reported 151 kboepd (thousand barrels of oil equivalent per day) in H1 FY21 against 187 kboepd in H1 FY20, impacted by planned maintenance programmes and unplanned outages.
• Rising Operating Cost: In H1 FY21, the company’s operating expenses per barrel was USD 15.6/boe, compared to USD 10.2/boe in H1 FY20, owing to reduced output.
• Overvalued Multiples: On a forward 12-month basis –EV/EBITDA, Price/Cash Flow, Price/Book Value and Price/Earnings valuation multiples of HBR are overvalued against the energy sector.
• Macroeconomic Risk: The Russian invasion in Ukraine has already jolted the market, while the slow retail growth and battered consumer spending in the UK amid rising fuel costs can keep the equity market under pressure.
• Gloomy Outlook: The year 2022 is expected to be the year of inflation, Central Bank tightening, and wage pressure. All these factors can hurt the corporate profits and equity markets.
• Technical Indicator: From a technical standpoint, Bollinger Bands suggests that the price has breached the upper Bollinger Band, while the 14-day RSI (~69.98) is also in the overbought position.
  

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group) 

Conclusion

Based on the decreased production, rise in operating costs, overvalued multiples, and bearish technical indicators, we have given a “WATCH” recommendation on Harbour Energy PLC at the closing market price of GBX 412.00 (as of 02 March 2022).

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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