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(Sharecast News) - Shore Capital initiated coverage of Ithaca Energy on Tuesday with a 'buy' rating and 340p price target, saying it has established itself among the largest remaining UK oil and gas producers after a decade of acquisition activity.
The broker said Ithaca has reached a scale where its portfolio can generate sufficient cash flow to fund stable - if not growing - production, while paying a circa 8% dividend yield.
"Having endured a challenging UK fiscal and regulatory environment over the last five years, we believe Ithaca is strongly positioned to benefit from a more pragmatic UK energy policy," it said.
Shore also argued that major shareholders strengthen the investment case. It said the shareholdings of Israel's Delek Group (around 50.5%) and Italy's Eni (circa 35.9%) limit Ithaca's free float to approximately 13.6% or $860m at the current share price.
"We view both major shareholders as long-term investors aligned with management's growth ambitions for the company," the broker said. "We believe the current shareholder structure has enhanced Ithaca's access to capital."
Shore said the support is proactive, with five nominated non-executives on the board and Ithaca able to leverage Eni's deeper technical capabilities to evaluate projects and acquisitions.
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