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 46.00 to EUR 54.00.

Abstract
DRAG has raised its 2024 guidance. Management is now looking for revenue of €210m-€230m (previously: €175m-€195m) and EBITDA of €160m-€180m (previously: €130m- €145m). The guidance upgrade is based on strong volume from existing wells and expansion of the drilling programme. The wells which came on stream in late 2023 have maintained high output levels into the new year and Q1/24 production was 14% above budget. DRAG is now guiding towards full-year production of 14,700-15,700 barrels of oil equivalent per day (boepd). The mid-point of this guidance is 20% above last year’s production figure of 12,700 boepd and is all the more spectacular when one considers that the Utah transaction at the end of 2023 entailed the disposal of assets which generated 10% of last year’s production. Higher than expected cashflows so far this year have prompted management to add 6 to 7 wells to the original 2024 drilling schedule. DRAG is now guiding towards 2024 investment volume of €145m-€165m (previously: €110m), but despite the hefty rise in production, we still expect net gearing to fall this year. The upward revision to DRAG’s sales and EBITDA guidance is based solely on volume. Management’s 2024 oil price assumption is unchanged at USD75/bbl and the gas price assumption is now USD2/MMBtu (previously: USD3/MMBtu). The oil price has averaged USD78/bbl so far this year. Clearly, if the oil price remains at its current level of USD85/bbl, there could be further upside to 2024 guidance. We have moved our forecasts into line with 2024 guidance and also reworked our medium term numbers to reflect DRAG’s capacity to shoulder?a substantial drilling programme without overstretching its balance sheet. DRAG will publish first 2025 guidance in the annual report on 23 April. On the basis of current commodity strips, we believe that DRAG is capable of sustaining revenue above €200m in the mid-term, while reducing net gearing. We maintain our Buy recommendation and raise the price target to €54.0 (previously: €46.0).