LONDON (ShareCast) - (ShareCast News) - RBC Capital Markets upgraded Nostrum Oil & Gas to 'outperform' from 'sector perform' saying recent weakness is an opportunity and its discount to peers it set to unwind as it delivers operational milestones.
The bank pointed out that Nostrum has underperformed the international exploration and production peer group by 20% and is now one of the most inexpensive stocks in its coverage, trading at a 14% discount to core net asset value.

However, RBC reckons this discount will unwind into year-end as the company completes its third gas processing facility, GTU3, doubling production capacity to more than 100,000 barrels of oil equivalent per day, and tests the appraisal well on the Rostoshinskoye field through the fourth quarter.

It said the stock's underperformance was likely to have been driven by uncertainty around the transfer of the former chairman's holding in Nostrum to BTA Bank and the associated overhand, but that this was overdone.

"Medium term we view Nostrum as a potential take out target given the focused portfolio, material reserves/production with some of the majors (already active in Kazakhstan) looking to rebuild portfolios following recent under investment."

At 1400 BST, the shares were down 0.1% to 388.30p.

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