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(Sharecast News) - EnQuest's recent rally has a lot further to run, according to Shore Capital, which said it expects the stock to nearly double, saying that the business gives investors more than just exposure to a soaring oil price.
The broker has raised its fair value estimate for the shares by 16% to 37p to reflect the company's recent annual results and new commodity price forecasts for 2026 to reflect the ongoing impact of conflict in the Persian Gulf.
Brent crude is now expected to average $80 a barrel for the year, up from a previous estimate of $64, while the post-2026 assumption of $70 remains unchanged.
For EnQuest, a $10/barrel swing in Brent should lift free cash flows by $45m-50m this year, though profits will rise by slightly less due to higher cash tax payments the following year.
Oil prices aside, Shore Capital highlighted EnQuest's desire to pursue a "meaningful transaction" in the UK, with adequate debt facilities to help fund a deal, while development-led growth in South East Asia - where it has already doubled net production - offers multiple opportunities.
"Management's presentation was a welcome reminder that the EnQuest investment case extends beyond material oil price leverage. An established strong track-record for operational delivery in the UK and SE Asia gives it the platform to pursue value-accretive growth in both regions. We reiterate our 'buy' rating, with our new fair value implying upside potential of c.95%," Shore Capital said.
The stock, up 75% already this year, was down 0.5% at 18.96p by 1339 GMT.
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