Scotiabank 23.00 CAD price targetLatest Research (November 05, 2021):
OUR TAKE: Positive.
ARX delivered stellar Q3/21 results with a ~12% Adjusted Funds Flow (AFF) beat and a ~27% free cash flow beat versus consensus. The company's 2022 capital budget and production guidance are in line with expectations; however, Attachie spending has been pushed back pending regulatory certainty. While this is not a surprise, the addition of a plant expansion and production ramp at Sunrise should help partially fill the growth gap. We think the Sunrise plan makes sense given top tier economics from the play and the improved natural gas price outlook. We also believe the company's 52% dividend increase (yield moves to 3.3%) and clarity on its shareholder return plans (50% to 80% of free cash flow will be allocated to returns through the base dividend and buybacks) are positives for the stock. Overall, we believe that ARX offers good value, particularly in the context of the North American Senior Producer group with a solid strategy that provides a line of sight to both sustainable production growth and growing shareholder returns. We maintain our Sector Outperform rating and have increased our Target Price to $23/share on our updated estimates.