TD BUY-rated with a target price of $20Not sure if this was posted. TD's target price is $20:
Event
Reports Q2/22 results
Impact: POSITIVE
Q2/22 Results Beat Versus TD/Consensus Forecasts: Production of 65.0 mBOE/ d came in at the top end of company guidance of 62.5-65.0 mBOE/d and above our estimate (63.3 mBOE/d) and Consensus (63.4 mBOE/d). CFPS of $0.83 also came in modestly above our forecast ($0.81) and Consensus ($0.82). Capex of $115mm came in slightly above our forecast; however, FY2022 production (67-69 mBOE/d) and capex ($355-375mm) guidance were maintained. NuVista signaled that 2023 capital could be accelerated into H2/22 eventually to capture efficiencies and maintain rig cadence. We currently forecast 2022 capex at the top end of guidance with modestly higher spending next year. New Well Performance Tracking Ahead of Expectations While NuVista Has
Successfully Mitigated Inflationary Pressures (So Far): Recent pad costs at Pipestone have been largely in-line with levels seen in 2021 as efficiency gains have somewhat offset cost inflation. Recent Pipestone pads (#9/#10) continue to showcase quick well payouts and high condensate rates (50% of total production). NuVista also drilled a 4-well pad in Gold Creek (7-14) that had an IP30 of 1,420 BOE/d (40% condensate). Importantly, one of these wells was drilled into the lower Montney and had an IP30 of 1,340 BOE/d (48% condensate). In our view, this could open up additional inventory (94 contingent resource but no 2P locations booked in Lower Montney at Gold Creek).
Near-Term Debt Target Moving Closer, Return of Capital Likely Accelerating. NuVista had previously articulated a formulaic RoC strategy (25-50% of FCF), however, the company forecasts it could return the upper-end of this range while still achieving its net debt target of $200mm by year-end. We now forecast 50% of FCF coming back to shareholders in the form of buybacks this year and 37.5% in 2023. The company plans to explore additional options for returning capital if the NCIB is exhausted (including a potential SIB).
TD Investment Conclusion
We forecast that the company will return 12% of the current market cap through share buybacks through 2023, while still providing investors with significant production growth next year (25% y/y). Our estimates are only modestly impacted by this update and we remain BUY-rated with a $20.00 target.