TP&H 09:50 AM EDT, 06/29/2022 (MT Newswires) -- Tudor, Pickering, Holt on Wednesday reiterated its buy rating on the shares of Whitecap Resources (WCP.TO) with a C$14.00 price target after the Western Canadian oil and gas producer agreed to buy XTO Energy Canada, jointly owned by Exxon Mobil (XOM) and Imperial Oil (IMO.TO) for C$1.9 billion to gain production and lands in the prolific Duvernay and Montney fields.
"Yesterday, WCP announced the acquisition of XTO Energy Canada's 32mboepd (30% condensate and NGLs) portfolio across the Montney and Duvernay for C$1.9B in cash (C$1.7B net of positive working capital), bolstering the free cash flow and shareholder returns outlooks in tandem with the transaction," analyst Matt Murphy noted. "Based on the company's 2023 plans and reference price deck ($85/bbl WTI and C$4.50/GJ AECO), the ~C$185MM in free cash flow implies a ~10.5% free cash flow yield net of assumed positive working capital which screens above current WCP valuation (we model WCP at 22% at the same price deck), but infrastructure and acquired inventory boost the long-term outlook for the company ... With the transaction, the company announced an updated capital allocation framework alongside net debt milestones, with the dividend increased +22% (~4.5% implied yield) and expected future increases to come alongside leverage targets."