ATB While he thinks Spartan Delta Corp.’s third-quarter financial release brought few surprises, ATB Capital Markets analyst Patrick O’Rourke is taking a “neutral view” of its shares after a “first gauge of the new business” following the $1.7-billion sale of its Gold Creek and Karr Montney assets to Logan Energy Corp. earlier this year.
Accordingly, he lowered his rating for the Calgary-based company to “sector perform” from “outperform” previously.
“Although SDE management has an excellent track record of long-term value creation (as demonstrated by the recent asset sale, special dividend payment, and spin out of Logan Energy), we have determined that a modestly higher risking factor of our NAV estimates is prudent and appropriate as we evaluate the medium- and longer-term outlook for the assets and business strategy,” said Mr. O’Rourke.
After the bell on Tuesday, Spartan reported production and financial results that largely fell in line with expectations. Production of 37,518 barrels of oil equivalent per day and cash flow per share of 37 cents both narrowly exceeded the Street’s expectations of 37,400 boe/d and 36 cents. Capital expenditures of $27.5-million was lower than the consensus forecast of $27.6-million.
“The company exited Q3/23 with $64.5-million in net debt, and plans to release its formal 2024 guidance before year-end, providing investors with a more fulsome view of the long-term strategy for the business mode,” said Mr. O’Rourke.
Calling it “the first clean quarter” of results since the Montney asset sale, he trimmed his target for Spartan shares by $1 to $5. The average target on the Street is $6.