Echelon Initiates Coverage Echelon Capital Markets analyst Adam Gill initiated coverage of four energy stocks on Wednesday.
Saturn Oil & Gas Inc. (SOIL-T) with a “buy” rating and $5.65 target. The average is $5.80.
“Saturn has been a quickly growing oil producer, driven by acquisitions, growing from 233 Boe/d in Q121 to 27,000 MBoe/d today,” he said. “A large part of the financing for the acquisitions has come via senior term debt with a US family office that has a rapid payback period (post the Ridgeback deal in Q123, $202.9-million is due back in Q2-Q423 with an additional $202.8-million due in 2024, with $557.5-million outstanding at the end of Q223). We believe that as this debt is extinguished, the market will re-rate the stock higher as the Company’s risk profile improves.
“We see numerous positives in the Saturn story: 1) In the current strip environment and under our conservative capital assumptions, Saturn is in solid shape to address the senior term note payback and still have a very discounted valuation; 2) The Company has been executing well in its core plays, notably seeing an improvement in Oxbow drilling year-to-date; 3) There is strong potential to unlock additional Bakken acreage in SE Saskatchewan with non-fraced, multi-lateral wells. From a stock perspective, the valuation is extremely compelling with a 1.4 times 2024 estimated EV/DACF multiple and a 55-per-cent 2024 estimated FCF yield (diluted share count valuation) – by far the cheapest stock in the Canadian junior E&P universe. "