National Bank Raises Target Despite a “weak” finish to 2022, energy equity analysts at National Bank Financial are optimistic about the fortunes for Canada’s energy industry this year, expecting macro tailwinds to mitigate potential concerns.
“2022 was unequivocally another solid year for the energy sector as it earned the top-performing sector within the S&P/TSX Composite index for the second consecutive year,” they said.
In a research report released Wednesday, the firm emphasized the sector’s equities have shown resiliency and sees further upside, pointing to current valuations and potential higher cash returns
“2023 outlook: down, but not out,” it said, with “cash returns poised to rise” as many companies are quickly approaching their net debt and leverage targets.
“We expect inventory-driven M&A to gain momentum, driven by the need for operators to pad drilling inventory after multiple years of underinvestment and a lack of transacting,” the analysts added.
After adjusting their financial models and projections for the year ahead, the analysts made a series of target price adjustments to their coverage universe.
Their large-cap changes include:
- Cenovus Energy Inc. ( “outperform”) to $39 from $36. The average is $33.28.
- Imperial Oil Ltd. ( “sector perform”) to $85 from $80. Average: $79.18.
- Suncor Energy Inc. ( “sector perform”) to $57 from $54. Average: $53.60.
Other changes include:
- ARC Resources Ltd. ( “outperform”) to $21 from $23. Average: $25.04.
- Birchcliff Energy Ltd. ( “outperform”) to $12 from $13.50. Average: $14.23.
- Baytex Energy Corp. (“sector perform”) to $7.75 from $9. Average: $8.89.
- Crescent Point Energy Corp. ( “outperform”) to $15 from $17. Average: $14.77.
- Enerplus Corp. ( “outperform”) to $23 from $21. Average: $24.98.
- Kelt Exploration Ltd. ( “outperform”) to $7.50 from $8. Average: $9.52.
- NuVista Energy Ltd. ( “sector perform”) to $16 from $15. Average: $16.81.
- Peyto Exploration & Development Corp. (“outperform”) to $18.50 from $17. Average: $17.88.
- PrairieSky Royalty Ltd. ( “sector perform”) to $25 from $24. Average: $25.11.
- Tourmaline Oil Corp. ( “outperform”) to $90 from $100. Average: $98.42.
- Vermilion Energy Inc. ( “outperform”) to $29 from $50. Average: $37.29.
- Whitecap Resources Inc. (“outperform”) to $15 from $15.50. Average: $14.80.
For gas, National Bank’s top picks for the year are Advantage Energy Ltd. (“outperform” and $16 target), ARC Resources Ltd., Birchcliff Energy Ltd. and Tourmaline Oil Corp.
For oil, it prefers Cenovus Energy Inc. ,
decrease
Enerplus Corp. , Headwater Exploration Inc. ( “outperform” and $9.50 target), Tamarack Valley Energy Ltd. (”outperform” and $8 target) and Whitecap Resources Inc.