Last Update 09 Dec 25

DNO: Solid Q3 Delivery And Recent Selloff Will Drive Share Rebound

Analysts have raised their price target on DNO to NOK 18.50 from NOK 17.50, reflecting increased confidence in the company after a solid Q3 report and its attractive valuation following the recent share selloff.

Analyst Commentary

Bullish analysts highlight that the recent upgrade to a Buy rating aligns with improving fundamentals and a supportive valuation backdrop. The solid Q3 performance is seen as evidence that DNO is executing well operationally while the share price has not fully reflected these gains.

They note that the new price target still leaves meaningful upside from current levels, suggesting that the market is underpricing the company’s cash flow potential and portfolio resilience. The combination of operational delivery and a discounted entry point is viewed as an attractive setup for risk tolerant investors.

Bearish analysts, however, remain cautious that the re rating may depend on continued flawless execution and a stable macro environment. They stress that while the valuation is appealing, there is still uncertainty around commodity price volatility, project timelines, and geopolitical exposure in some of DNO’s operating regions.

As a result, the analyst community appears more constructive than earlier in the year, but still attentive to the balance between upside from improved earnings visibility and the lingering execution and macro risks that could limit multiple expansion over the medium term.

Bullish Takeaways

Bullish analysts view the rating upgrade as confirmation that DNO’s solid Q3 delivery is translating into stronger confidence in earnings quality and cash generation.
The increase in the price target is seen as a signal that the current valuation does not fully capture the company’s operational improvements and future growth opportunities.
Recent share price weakness is framed as a mispricing, offering an attractive entry point relative to improved fundamentals and sector peers.
Improved visibility on near term performance supports the case for a gradual re rating as execution continues to track ahead of earlier expectations.

Bearish Takeaways

Bearish analysts caution that the upgraded target price already bakes in a supportive commodity price environment, leaving limited room for disappointment.
There are ongoing concerns that geopolitical and regulatory risks in core regions could disrupt operations or delay projects, affecting growth and valuation.
Some remain wary that recent operational strength may prove cyclical rather than structural, which could cap sustainable multiple expansion.
Execution needs to remain consistently strong to justify the higher price target, and any setback in production or costs could quickly pressure the shares again.

What's in the News

DNO issued new production guidance for Q4 2025, targeting North Sea net production approaching 90,000 boepd and Kurdistan approaching 60,000 boepd, supported by new volumes from the Andvare and Verdande fields (Company guidance).
Aker BP and DNO entered into strategic agreements involving licence interest swaps, transfer of Verdande ownership to DNO, and fast-track development of the Kjottkake discovery, pending regulatory approvals and partner consents (Company announcement).
DNO reported Q3 2025 results showing sharply higher net entitlement production from the North Sea at 77,323 boepd, which offset lower gross operated volumes in Kurdistan, with a steady contribution from Côte d'Ivoire (Q3 2025 results).
DNO prepared to resume oil exports via the Iraq Turkiye Pipeline from 27 September 2025 under new arrangements between Baghdad, the KRG and international oil companies, with initial payments of USD 14 per barrel expected in mid December (Company announcement).
DNO appointed Birgitte Wendelbo Johansen as Chief Financial Officer effective 1 November 2025, succeeding long-serving CFO Haakon Sandborg, who will transition to a senior advisory role through year end (Executive appointment release).

Valuation Changes

Fair Value: Unchanged at NOK 18.50 per share, indicating no revision to the fundamental valuation level despite recent share price volatility.
Discount Rate: Fell slightly from 7.00 percent to about 6.96 percent. This reflects a marginally lower perceived risk profile or cost of capital for DNO.
Revenue Growth: Essentially unchanged at around 37.8 percent, suggesting that medium term top line expectations remain stable.
Net Profit Margin: Stable at approximately 22.5 percent, indicating no material shift in expected profitability assumptions.
Future P/E: Edged up slightly from about 3.13x to 3.16x, implying a modestly higher earnings multiple embedded in the updated valuation.

The Sval Energi acquisition and focus on efficient, high-margin assets strengthen DNO's production base, positioning it for stable cash generation and margin expansion.
Flexible capital allocation, improved balance sheet, and potential revenue upside from Kurdistan negotiations support shareholder value and future growth opportunities.
Heavy exposure to Kurdistan, increased debt from acquisitions, aging assets, and global decarbonization trends threaten operational stability, cash flow, and long-term profitability.

Catalysts

About DNO

Engages in the exploration, development, and production of oil and gas assets in the Middle East, the North Sea, and West Africa.What are the underlying business or industry changes driving this perspective?

The transformational acquisition of Sval Energi materially increases DNO's long-term production base and reserves in the North Sea, positioning the company to benefit from persistent energy demand tied to global population growth and slow energy transition in many markets, thus supporting higher future revenues and stable cash generation.
Ongoing underinvestment in new oil projects globally supports a constrained supply environment; as DNO focuses on low-cost, high-margin assets and has ramped up production capabilities after operational setbacks, this positions the company to achieve strong net margins and cash flow as oil prices remain structurally supported.
Accelerated advancements in operational efficiency, technology adoption, and high-grading of the expanded portfolio (including synergies from the Sval acquisition) are expected to lower production costs, improve asset productivity, and drive further EBITDA margin expansion in coming years.
DNO's prudent capital allocation and strengthened balance sheet (following debt refinancing and new flexible funding sources) give it the ability to reinvest for production growth or increase capital returns such as dividends, directly supporting earnings growth and shareholder value.
Ongoing negotiations around Kurdistan export infrastructure and DNO's position as a key regional producer create potential for meaningful upside to revenues and cash flow if pipeline access is re-secured, while local offtake arrangements currently allow for sustained operations and steady income.

DNO Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming DNO's revenue will grow by 50.4% annually over the next 3 years.
Analysts assume that profit margins will increase from -11.5% today to 16.8% in 3 years time.
Analysts expect earnings to reach $453.5 million (and earnings per share of $0.27) by about September 2028, up from $-90.8 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.6x on those 2028 earnings, up from -15.8x today. This future PE is lower than the current PE for the GB Oil and Gas industry at 8.4x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.85%, as per the Simply Wall St company report.

DNO Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

DNO's Kurdistan operations are subject to significant geopolitical and security risks, including recent drone attacks and ongoing regional instability, which have already damaged infrastructure and required costly repairs; ongoing or future disruptions could materially impact production levels and revenue consistency.
The company continues to face chronic payment uncertainties and significant outstanding receivables from both the Kurdistan regional government and the central government of Iraq, creating prolonged working capital risks and potential revenue shortfalls if historic arrears and future sales are not reliably settled.
A substantial portion of DNO's proven reserves in the Kurdistan region are in mature fields where production has only been sustained via workovers, not new drilling; there is a dependency on resumed drilling and additional capex to maintain or increase output, which could pressure net operating margins and future cash flows if not executed efficiently.
The Sval Energi acquisition, while transformational for North Sea production, has moved DNO to a significant net debt position ($860 million), increasing sensitivity to interest rates and the risk profile of future earnings, particularly if higher North Sea tax payments or unforeseen integration challenges arise.
Long-term, DNO remains highly exposed to secular industry risks-including accelerating global decarbonization initiatives, policy shifts towards renewables, and higher investor ESG scrutiny-which may reduce oil demand, increase compliance costs, and ultimately compress sector-wide net margins and long-term earnings potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of NOK17.0 for DNO based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK19.0, and the most bearish reporting a price target of just NOK14.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $453.5 million, and it would be trading on a PE ratio of 4.6x, assuming you use a discount rate of 7.8%.
Given the current share price of NOK14.76, the analyst price target of NOK17.0 is 13.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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