First Berlin Equity Research has published a research update on Deutsche Rohstoff AG (ISIN: DE000A0XYG76). Analyst Simon Scholes reiterated his BUY rating and increased the price target from EUR 38.00 to EUR 40.00.

DRAG’s annual report published on 26 April confirmed the preliminary figures released on 10 March. The most important new element in the annual report is an upward revision to 2023 and 2024 guidance. The last guidance update before publication of the annual report was on 12 December. New base case revenue and EBITDA guidance numbers for 2023 are respectively 7% and 4% above the previous figures. 2024 revenue and EBITDA guidance numbers are now €170m-€190m and €130m-€145m respectively (previously: >€120m and >€100m respectively). EBITDA guidance rises less strongly than revenue guidance because the new base case scenario is based on a gas price of USD3/MMBtu (previously: USD4/MMBtu) in both years. The oil price assumption is unchanged at USD75/barrel for both years. Oil and gas respectively accounted for 53% and 30% of group volume in 2022 with natural gas liquids making up the balance. The increase in guidance for both 2023 and 2024 is based primarily on higher volume expectations. As DRAG reported on 11 April, Q1/23 production was ca. 7% above expectations. The strong performance was driven mainly by the Knight pad and the Occidental JV where output was respectively 15% and 25% above the reserve estimate. The full Q1/23 report is due later this month. 2024 volume guidance has received a further boost from the announcement in the annual report that DRAG’s subsidiary, 1876 Resources (formerly Cub Creek), plans to drill a further six gross wells (90% working interest) in Wyoming. We have incorporated the new guidance into our own forecasts and now see fair value for the DRAG share at €40.0 (previously: €38.0). We maintain our Buy recommendation.