Energean: Owner-Operated, Shrewd Capital Allocator in Natural Gas E&P

Gokul Raj Ponnuraj of Bavaria Industries Group presented his investment thesis on Energean (UK: ENOG) at European Investing Summit 2024.

Thesis summary:

Energean is run by a solid owner-operator who has demonstrated smart capital allocation (three value-accretive mergers and acquisitions), along with solid operational execution (development of a large gas field to production).

The company’s core asset generates gas at a very low cost and has a 17-year production runway, supplying to a region with attractive supply-demand dynamics. Unlike several other oil and gas firms, Energean has limited volatility to the commodity price due to fixed long-term contracts.

The recent war in Israel provides an attractive entry point, offering a 10+% regular dividend yield. The firm is also expected to announce a special dividend of 10% and could return 50+% of its market cap over the next four years.

The recent market quotation may offer a 15+% IRR opportunity with idiosyncratic risks.

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About the instructor:

Gokul Raj Ponnuraj is a value investor with a focus on small and mid-cap compounders and spin-off’s with a bias towards emerging markets. He has been investing in the Indian markets since 2006 and in global markets since 2017. Gokul Raj manages the public equities portfolio at Bavaria Industries Group. The firm uses its balance sheet assets (permanent capital) to invest in opportunities with an attractive risk-reward trade off. Gokul Raj holds a Master in Finance degree from London Business School and a CFA charterholder.