National Bank as of May 16th - Dan Payne Beat on the Quarter Backstops Intact Outlook
BIR (TSX) STOCK RATING TARGET EST. TOTAL RETURN C$5.87 Sector Perform (Unchanged) C$6.50 (Unchanged) 17.5% Q1/24
Operating & Financial Results
Q1/24 Results Ahead of Expectations
The company reported first quarter operating & financial results ahead of expectation, with average production of 75.4 mboe/d (18% liquids) and associated CFPS of $0.25 (vs. consensus $0.21). • During the period, it saw production maintained (-1% Q/Q) within the context of a ~155% payout ratio (40-45% of capex allocated), while its balance sheet remained intact with net debt at the end of the period of $443.4 mln (+16% Q/Q), or 1.7x annualized Q1 D/CF. • That performance was supported through a low gas price environment (AECO -10% Q/Q, $2.07/mcf), with its cash costs (-10% Q/Q) and liquids profile (supporting ~50% of revenue) insulating its netback of $10/boe (-11% Q/Q). • A key initiative within its efforts through the period was a dynamic approach towards marketing and costs, which should provide resonant support to sustainability over the long-term.
Staying the Course; Outlook Intact Through the duration, its announced capital program remains intact, with $250 mln in spending to largely maintain volumes (75.5 mboe/d; mid-point) within the context of a ~90% payout ratio, with the increment of its dividend (7% cash yield; 40% payout) to be supported thereafter. • To that end, it continues to high-grade efficiencies through refined well design and strength of well performance (cap. efficiencies -15% Y/Y), allowing it to manage production on an unchanged basis while deferring activity through a largely unchanged capital budget, which could also prove an increment of insulation in support of sustainability over the long-term (i.e. lower sustaining capital requirements).
Maintain Sector Perform Rating & Target Price of $6.50
The company continues to positively navigate the prevailing price environment, with visibility towards sustainability within targeted leverage metrics through the 2025e forecast period, which should ultimately serve to validate its ultimate value proposition; BIR is poised for a 15% return profile (vs. peers 18%) on leverage of 1.0x (vs. peers 0.2x), while trading at 4.5x 2025e EV/DACF (vs. peers 3.7x).