Stifel Initiate Coverage Touting its improving oil sands margin structure and “significant” potential in Duvernay play in Alberta,. Stifel analyst Michael Dunn initiated coverage ofAthabasca Oil Corp. with a “buy” recommendation on Wednesday.
“With a rapidly improved balance sheet that should be in a net cash position by month-end, the nearing 5 mbbl/d expansion at Leismer, recent lasting improvements to Hangingstone’s margins, an attractive Duvernay position, our outlook for $0.7-billion ($1.22 per share) of FCF [free cash flow] over the next two years at the strip, the recent commencement of share buybacks, and a relatively low institutional shareholder following currently, we expect institutional investors will be taking a fresh look at the stock. From a macro perspective, Athabasca fits our view that the biggest beneficiaries of the nearing start-up of the TMX pipeline will be those Canadian heavy oil producers with no export pipeline commitment.”
Expecting “strong” free cash flow with an active share buyback program going forward, Mr. Dunn set a target of $5 per share, matching the high on the Street and exceeding the $4.39 average.