First Berlin – Deutsche Rohstoff AG Research Update (14/05/2019)

First Berlin Equity Research has published a research update on Deutsche Rohstoff AG (ISIN: DE000A0XYG76). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 23.80 to EUR 23.00.

During most of 2018 we assumed that DRAG would begin producing from new wells at Cub Creek in 2019. However, drilling plans were put on hold during the oil price collapse from USD76 to USD42 in Q4 last year. The oil price has since rallied to over USD60 and DRAG has signalled that it will resume drilling at Cub Creek later this quarter. Given that new production will not be coming on stream until 2020, we expect DRAG's oil and gas output to fall in 2019 before climbing again next year. Management guidance for 2019 is revenue and EBITDA of €40-50m and €25-35m respectively and for 2020 revenue and EBITDA of €75-85m and €55-65m respectively. We maintain our Buy recommendation but lower the price target from €23.8 to €23.0 to account for a later production start at Cub Creek's Knight drilling pad than previously modelled.