Desjardins Raises Target Desjardins Securities’ Chris MacCulloch raised his ARC Resources Ltd. target to $26 from $25 with a “buy” rating. The average is $24.47.
“Casting aside B.C. regulatory uncertainty for a brief moment, it is tough to find a better bargain in the Canadian energy sector than ARC these days,” he said. “The company has executed on operational targets after shifting capital into Alberta, where it has taken advantage of underutilized infrastructure capacity at Kakwa while trimming debt levels, both of which stem from last year’s transformative acquisition of Seven Generations Energy.
“More importantly, ARC has significantly accelerated capital returns, which accounted for a whopping 94 per cent of FCF generated in 3Q22, primarily through share buybacks. Following this performance, we have increased our buyback assumption to 75 per cent of discretionary FCF (from 50 per cent), all while continuing to conservatively assume our target price as the cost basis for share repurchases. As we have frequently noted, there are multiple ways to grow per-share metrics and it is tough to argue with the merits of a buyback-centric strategy for ARC, which we consider a top-tier producer trading at a middle-of-the pack multiple at 3.6 times 2023 DACF based on the current strip.”
* Mr. Chris MacCulloch also raised his Tourmaline Oil Corp. target to $97 from $92 with a “buy” rating. The average is $98.50.
“While acknowledging that valuation is beginning to stretch, we continue highlighting the stock as a unique way to gain exposure to JKM LNG prices from the best-run natural gas producer in North America, in our view,” he said.