On Tuesday, TGS NOPEC Geophysical Co ASA (TGS:NO) (OTC: TGSNF) experienced a downgrade in stock rating by Kepler Cheuvreux, moving from Buy to Reduce, accompanied by a significant reduction in the price target to NOK80.00, down from NOK155.00. The revision in the investment firm's outlook is attributed to a strategic shift in TGS's business model following its merger with PGS.
The analyst from Kepler Cheuvreux expressed concerns over the implications of the merger for TGS, suggesting that the company's profile has "completely changed." The analyst predicts that TGS will face disadvantages over the next two years, particularly in a scenario where oil prices are lower. This environment could make it more challenging for TGS to secure bookings for its vessels.
According to the analyst's statement, there is an expectation that interest in late sales from TGS's clients will likely diminish. Owning the vessels post-merger, the company might undertake multiclient (MC) surveys with a low pre-funding rate to maintain vessel utilization, as proprietary work is anticipated to decrease.
Kepler Cheuvreux's revised stock price target of NOK80.00, down from NOK155.00, reflects these concerns and the potential impact on TGS's financial performance. The downgrade from Buy to Reduce signals a less optimistic outlook for the company's stock in the near term.
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