Diversified Energy Company PLC (LSE:DEC, OTCQX:DECPF)‘s shares are priced at a “very attractive” discount, according to stockbroker Peel Hunt, which today repeats a ‘buy’ recommendation after the firm’s ESG focussed Capital Markets Day.
With a 160p price target, the stockbroker sees nearly 50% upside to DEC’s current price of 107.4p.
Analyst Matt Cooper, in a note, said the recent share price weakness was unjustified given the company’s comprehensive greenhouse gas (GHG) emissions targets which were discussed in more detailed at last week’s virtual investor event.
“At the Capital Markets Day, DEC announced methane reduction targets of a 30% cut by 2026 and a 50% cut by 2030 (against a 2020 baseline),” Cooper said.
“The targets appear sufficient to meet US Environmental Protection Agency’s proposals to reduce methane emissions 75% by 2035. DEC has accelerated its commitment to reach carbon neutrality by 2040, a decade earlier than the previous commitment.
“DEC also announced that future GHG emissions figures are to be audited by a third-party expert.”
Peel Hunt anticipates the company’s investments in emissions reduction will amount to US$15mln per year.
Cooper highlighted: “[DEC] shares remain down from the 2021 high of 131p, and are 35% below core net asset value(NAV).
“Catalysts to close this valuation gap include completion of the Tapstone acquisition, further divestments of undeveloped acreage, additional M&A, and a borrowing base increase at the November redetermination.”