Voyager Upgrader From a NBF report this morning about HNL:
First real indication of the Voyager Upgrader potentially
being cancelled.
Last night, Bird Construction (BDT-T, n/r) announced it
“received a contract termination notice for convenience from
an oil sands client” and noted the contract would be removed
from its backlog. In May, BDT announced it had been awarded
the Early Works Civil Program for Suncor’s (SU-T, OP,
$44.00) Voyageur project. We suspect the unspecified
cancellation relates to Voyageur, especially the coincidental
timing given SU’s indication on deciding the Voyageur fate in
Q1 2013.
Headline risk for HNL; consensus estimates may need to
be adjusted down but no changes to our forecasts.
We previously trimmed our estimates on the renewed Suncor
contract and at that time excluded our estimated bed demand
for Voyageur in H2 (about 470 beds, by NBF estimate).
However, we believe consensus may not share our view. We
leave our estimates unchanged but caution that consensus
estimates may be set modestly lower (Exhibit 1).
Maintain Outperform rating and $8.25 price target.
Though we believe this news represents short-term
headwinds for Horizon North, our long-term fundamental view
on HNL is unchanged: growth areas in SAGD, mining and NE
BC gas projects, supplemented by turnover from the camps
replacement cycle will continue to drive bed growth through
H2 2013 and beyond. Furthermore, we continue to model an
increased annual dividend (to $0.24/sh from $0.20/sh) and
believe such an increase is announced in the near term. Our
$8.25 target represents 6.3x 2013e EV/EBITDA. Outperform.
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After the market sold the rumor, we'll see if it will buy the news!