Want a 86.8% return check out Birchcliff Energy LTD Birchcliff Energy Ltd BIR
ScotiaBank Global Banking and Markets Company Edge Reports Just gave it rating of C$4.50 that is an 86.8% Return Cameron Bean | Analyst (Scotia Capital Inc. - Canada) cameron.bean@scotiabank.com | 403-218-6786 For Reg AC and important disclosures, please visit gbm.scotiabank.com/disclosures. Historical price multiple calculations use FYE prices. Source: FactSet; company reports; Scotiabank GBM estimates. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S. Birchcliff Energy Ltd.(BIR-T) E&P Price 1-Yr. Target 1-Yr. Return Div. (Curr) Div. (NTM) Yield (Curr) Rating February 4, 2021 C$2.42 C$4.50 86.8% C$0.02 C$0.02 0.8% Sector Outperform Capitalization Market Cap. (M) C$651 Net Debt + Pref. (M) C$877 Enterprise Value (M) C$1,528 Shares O/S (M) 269 Float O/S (M) 216 Volume and Closing Price for BIR-T 2.5 2 1.5 1 0.5 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 7 6 5 4 3 2 1 0 Volume BIR-T Vol (M) Price Source: FactSet Next Release: February 10, 2021 Valuation: 50/50 weighting of 5.0x our blended '21E/'22E DACF estimate and our Scenario Sum of the Assets NAV estimate. Key Risks: Oil and natural gas prices; drilling program success. Company Profile: Birchcliff Energy Ltd. (Birchcliff) is a gas-weighted intermediate E&P. The company’s assets are focused in the Peace River Arch area (Pouce Coupe, Gordondale Sinclair, and Worsley) of Alberta, where it targets Montney natural gas and light oil and Charlie Lake light oil. Birchcliff produces ~80 mboe/d and has demonstrated a strong growth profile through the use of high-efficiency development drilling, accretive acquisitions, and strategic infrastructure ownership. The company is led by President and CEO Jeffery Tonken and trades on the TSX under the ticker BIR. Latest Research (January 20, 2021): OUR TAKE: Neutral. BIR's formal 2021 guidance is in line with its preliminary indication (see our Q3/20 results note), while the updated five-year plan confirms the company's focus on generating free cash flow and reducing debt. We believe BIR offers investors (1) sustainable production and attractive free cash flow profiles – on our updated estimates we expect ~20% free cash flow yield to equityon strip pricing; (2) torque to natural gas price improvements – we estimate >12% cash flow sensitivity to US$0.25/mmbtuHenry Hub price changes (see Exhibit 3), and (3) a solid balance sheet – on strip pricing, we expect BIR to exit 2021 ~65% drawn on its $1B credit facility, with an ~2.2x D/CF, decreasing to ~1.9x in 2022. Qtly CFPS Q1 Q2 Q3 Q4 Year 2019A C$0.43 C$0.27 C$0.23 C$0.30 C$1.22 2020E C$0.13A C$0.07A C$0.21A C$0.25 C$0.66 2021E C$0.25 C$0.26 C$0.35 C$0.41 C$1.27 2022E C$0.37 C$0.31 C$0.32 C$0.36 C$1.36 Financial Analysis - Dec 31 2019A 2020E 2021E 2022E Primary Per Share CFPS C$1.22 C$0.66 C$1.27 C$1.36 Cash Flow Growth 6.91% -45.88% 92.24% 6.68% Shares O/S (M) 292 290 290 290 Valuation Ratio FCF Yield 8.7% -21.2% 15.9% 22.0% Price/Cash Flow 2.1x 2.7x 1.9x 1.8x Cash Flow Capex/Cash Flow 0.92x 1.61x 0.67x 0.58x Debt Adj Cash Flow (M) C$357 C$209 C$375 C$392 Net Cap Exp (M) C$300 C$286 C$230 C$210 Debt Analysis Net Debt/(Net Debt+Equity) 29.5% 34.1% 30.2% 24.8% Net Debt/Cash Flow 2.3x 4.8x 2.2x 1.7x Industry Specific Natural Gas (%) 78% 77% 76% 76% Natural Gas (HH, US$/mmBtu) C$2.53 C$2.14 C$2.80 C$2.65 Oil Price (WTI, US$/bbl) C$57.02 C$39.40 C$50.53 C$57.00 Prod Growth 1.1% -2.1% 3.6% 1.2% Prod-Equiv (mboe/d) 78.0 76.4 79.1 80.1 Prod-Nat Gas (mmcf/d) 365.0 351.4 362.7 364.7 Prod-Oil (mbbl/d) 17.2 17.8 18.7 19.3 Prod/Share Growth 0.0% -7.1% 2.8% 11.4% Capital Structure Net Debt (M) C$733 C$857 C$752 C$604