(MENAFN- ProactiveInvestors) City broker Canaccord has joined the flurry of brokers to look at oil stocks and turned positive on North Sea oiler () pushing up the rating to 'speculative buy' from 'hold'.
Analyst Charlie Sharp reckons has "responded quickly" to reduced crude prices and concerns over its debt covenants.
Last month the firm's banks agreed to raise the bar for group gearing - and now net debt to earnings can be up to five times - until 2017 - as they recognized the considerable cash flow generating potential.
Canaccord said the speed of the firm's response had averted impending debt covenant tests.
Based on the broker's assumption of a recovery in the oil price to US$80 a barrel in 2018 it reckons should stay below its debt ceiling and within covenant.
"Of less immediate concern but likely to become more important is the effect that reduced or 'slowed' capex will have on 's production efficiency which is currently running at 90%" notes the broker.
It also reckons the "rephased" expenditure for new oil field development Kraken may result in some delay to field start-up which is currently targeted for 2017 though the broker already models first half 2018.
Canaccord has also raised its target price on the stock to 60p from 45p previously.
Elsewhere US broker Citi upgrades owner IAG's () target price to £6.50 from £5.85 and also lifted earnings estimates for the group based on lower spot fuel costs.
For 2014 estimates Citi raises its earnings before interest and tax figure (EBIT) to €1.37bn from €1.36bn. The rating is 'buy'.
There is much afoot at the airline giant currently not least the bid for Irish carrier Aer Lingus and news of the surprise swoop by Qatar airways to take a stake.
Qatar Airways 9.99% stake is unlikely to be much more than an investment reckons Citi.
"We expect IAG to eventually win bid for Aer Lingus. We believe IAG can assuage Govt concerns by preserving number of Heathrow slots for Irish routes and retaining brand. A merger would boost Irish jobs" it added.
Canaccord has been busy today. Its analysts have also started coverage on takeaway food specialist (LON:JE) with a 'buy' stance and price target of 420p.
The current price is around 72p ahead of that - at 348.5p.
" has performed well since its IPO last year trading 36% above its listing price. We see scope for further returns premised on rapid earnings growth and potential catalysts in the form of acquisitions" said analyst David Amiras.
He highlighted that the company received over 250000 orders on New Year’s day - 50% more than the turn of 2013/14 - demonstrating both the popularity of its service and the strength of its systems.
The firm is also experiencing rapid growth driven by the channel shift from offline to online takeaway – for example in the UK just 28% of takeaway customers currently order online but Canaccord expects this will increase over several years towards levels currently seen in Denmark where it is 58%.
Back to the oil and gas space and heavyweight Goldman is upbeat on () after it reported a stronger than expected fourth quarter set of numbers repeating a convictions list buy.
"We believe BG’s leading growing flexible LNG business long resource life production growth and exposure to the world’s largest and most profitable discovery in decades (the Santos basin) places it in good stead vs. the sector to deal with a world of sustained lower oil price" it said. The target price is unchanged at 1160p.
Conversely Liberum has reduced its target price on Shell () to 2120p from 2230p and lowered estimates. It reported Q4 earnings last week.
The broker is concerned by the marked ROACE (return on average capital employed) decline and reckons it could take "a while" to re-create value for shareholders.
It repeated a 'hold' stance.
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