Capricorn Energy PLC: Sell Rating Justified by Oil Outlook and Overvaluation Concerns

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Bank of America Securities analyst Matthew Smith downgraded the rating on Capricorn Energy PLC (CNE – Research Report) to a Sell today, setting a price target of p195.00.

Matthew Smith has given his Sell rating due to a combination of factors including a less optimistic oil price outlook and Capricorn Energy PLC’s share price performance. Despite a solid operational record with production exceeding full-year guidance and operating expenses falling below expectations, Smith anticipates that a lower oil price environment will negatively impact Capricorn’s EBITDA in the upcoming years. Moreover, he notes that Capricorn’s stock has significantly outperformed its peers this year, which might not be sustainable given the revised future earnings expectations. Additionally, while Capricorn has returned a substantial amount of cash to shareholders following a tax refund from India, the spotlight has now shifted back to its exploration and production operations, primarily in Egypt. Smith acknowledges improved receivables collection as a positive development but also points out the risks related to prior asset performance and the timeliness of future revenue collection. Considering these factors, Smith believes the market has already rewarded Capricorn’s recent successes, leading to the conclusion that the stock may now be overvalued, hence the underperform rating.

According to TipRanks, Smith is a 3-star analyst with an average return of 21.2% and a 62.50% success rate.

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Capricorn Energy PLC (CNE) Company Description:

Cairn Energy PLC is an independent oil and gas exploration and development company. The company engages in exploration activities in Greenland, Europe, and western Africa. Cairn gains access to potential fields through government-issued licenses and uses survey techniques to identify hydrocarbon reservoirs offshore. Exploration and appraisal drilling is used to determine if prospects exist, and to establish field size and appropriate production methods. Cairn counts on different drilling and well stimulation techniques to maintain peak production levels in its assets. Production can be exported directly from offshore facilities or connected to nearshore or onshore facility for processing and export.

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Capricorn Energy PLC: Sell Rating Justified by Oil Outlook and Overvaluation Concerns

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