Post by
mukh6 on Aug 31, 2017 10:19am
Too Attractive to Ignore
Time to back up the truck!!!
Saskatchewan oil producer Spartan Energy Corp. (SPE) edged up three cents to $5.42 on 4.05 million shares. The stock has nearly halved since the start of the year, but is now emerging as a clear favourite among the analysts at Scotia Capital. "Too Attractive to Ignore; We Think the Bears are Plain Wrong," declared Scotia analyst Cameron Bean in a boosterish research note published on Monday after the close. He said he recently met with Spartan's management for a technical presentation on the company's assets. Spartan has a "large oil-weighted prize" in southeast Saskatchewan, according to Mr. Bean, who pegged the company's estimate of its OOIP (original oil in place -- a very general estimate) at two billion barrels. Spartan also estimates that it currently has an inventory of 2,500 drilling locations, up from fewer than 2,200 in May. In addition, said Mr. Bean, the economics of Spartan's plays are "among the best in North America." He concluded that Spartan's stock is a "core holding and our best idea for oil exposure in the small- to mid-cap E&P [exploration and production] space." His price target stayed at $11.25, more than double today's close of $5.42.
More Scotia sunniness arrived this morning with the publication of its "Small/Mid-cap Best Ideas" list for the second half of 2017. There are 22 stocks on the list, including three oil and gas producers. Spartan, of course, is one of them. The write-up on Spartan praised its "high-return suite of assets, cash-flow-funded growth and unique torque to oil prices." Also complimented was the company's "A-level management team." Nearly all of Spartan's management previously worked together at Spartan Oil and, before that, Spartan Exploration. Spartan Oil went public in mid-2011 through an arrangement that included a financing at $1.49 a share, and was sold in 2013 to Bonterra Energy Corp. (BNE: $15.37) for about $5.50 a share. Spartan Exploration went public in early 2008 through an arrangement that included a financing at $1 a share, and was sold in 2011 to Obsidian Energy Ltd. (OBE: $1.19) for roughly $6 a share.
The latest version of Spartan has had a choppier history. When management first announced in late 2013 that it would create a new company by recapitalizing an old one, Alexander Energy, Alexander's stock instantly soared to about $6.60 from just $2.40. It kept rising over the next few months to nearly $13.50. Investors have had plenty of opportunities over the years to sell their shares for healthy profits, but as noted above, 2017 has been difficult. Earlier this month, the stock went below $5 for the first time since its days as Alexander. (All share amounts have been adjusted for a 1-for-4 rollback in early 2014 and a 1-for-3 rollback two months ago.)