MUSCAT: OQ Exploration and Production (OQEP) — one of the largest producers of oil and gas in the Sultanate of Oman — is emerging as a highly attractive investment opportunity, despite initial struggles following its IPO, according to a recent report by Oman Investment Bank (OIB). The OIB — the nation's first government-owned corporate investment bank — maintains an overweight recommendation on the stock, citing robust financial performance, strong cash flows, and an attractive dividend yield among the highest on the Muscat Stock Exchange (MSX).
While concerns over market saturation and oil price volatility weighed on OQEP’s stock post-listing, OIB asserts that these fears have been overblown. The company’s preliminary FY24 results exceeded forecasts, demonstrating its financial resilience. With revenues of $2.31 billion and a net profit of $818 million, OQEP outperformed OIB’s estimates by 4% and 2%, respectively. The final results, expected soon, are likely to confirm a substantial performance dividend for 2025, further boosting investor confidence.
DIVIDEND YIELDS AMONG THE HIGHEST ON MSX
One of OQEP’s key strengths is its industry-leading dividend yield. The company’s base dividend of $600 million translates to a 9.2% yield, already among the most attractive on MSX. Additionally, OQEP has the potential to distribute an additional $265 million in performance dividends for 2025, increasing the total dividend yield to an impressive 13.3%. This figure surpasses many global energy players, including Saudi Aramco, and is more than triple the yield offered by emerging market peers such as Dana Gas, KazMunaiGas, and MedcoEnergi.
OIB highlights that even at lower oil prices, OQEP’s base dividend remains secure at $50 per barrel, while the performance dividend becomes payable at $55 per barrel, increasing as oil prices rise. With Brent crude averaging over $77 per barrel in 2025 so far, the outlook for OQEP’s dividend distribution remains highly favourable.
STRONG CASH FLOW AND MARKET POSITION
OQEP’s strong free cash flow generation and conservative financial management further strengthen its investment case. The company boasts approximately 1 billion barrels of oil equivalent (2P working reserves) and a current production capacity of 240,000 barrels of oil equivalent per day (kboed), positioning it as a key player in the upstream oil sector.
Despite its strong financial fundamentals, OQEP is currently trading at some of the lowest valuation multiples among its global peers. OIB sees this as an unjustified market reaction, particularly given the company’s performance and oil price stability. Unlike its US and UK-listed counterparts, which have seen stock price gains in line with market trends, OQEP has underperformed, providing an attractive entry point for investors ahead of the likely confirmation of a significant performance dividend for 2025.
A STRONG INVESTMENT OPPORTUNITY
OIB concludes that OQEP’s post-IPO stock price weakness is unwarranted given its high profitability, strong dividend outlook, and favourable oil market dynamics. The bank maintains a target price of RO 0.433, implying a potential total return of over 50%, including dividend income and capital appreciation.
With a combination of solid financial results, generous dividend payouts, and an improving macroeconomic backdrop, OQEP stands out as a compelling investment opportunity for those seeking exposure to Oman’s growing energy sector. As market sentiment catches up to fundamentals, OIB expects OQEP to deliver substantial value to its shareholders in the years ahead.
Oman Observer is now on the WhatsApp channel. Click here
