Dundee...YOU LIKE!!!!!!!!
New Poseidon stock worth a look: Dundee
Christine DobbyNov 7, 2011 – 11:40 AM ET
Betting on the future of Poseidon Concepts Corp.’s unique storage system for fracturing fluid, Dundee Capital Markets is taking a bullish stance on the new stock.
With the spinout of Poseidon from Calgary-based Open Range Energy Corp. now complete, Dundee analyst Grant Daunheimer has initiated coverage with a buy rating and a 12-month target price of $13.25 on Poseidon. (GOLONG says...Think HIGHER 12 mo. target, $13.13 out of the gate!)
“We continue to view Poseidon concepts as a strong, emerging player in the oilfield services industry with a powerful first-mover advantage, sound and growing markets presence, what we view as an attractive and sustainable dividend, and a management team we see as being capable of leading this company going forward,” Mr. Daunheimer said in a note Monday.
Poseidon has operations in two provinces and 14 U.S. states with more than 70 distinct customers and multiple patents on both sides of the border, he noted.
The company’s modular tanks are used to handle liquids, like fracturing fluid and sediment ponds, used in unconventional oil and natural gas plays. Open Range launched the tanks as a fluid management business in May 2010 and announced a realignment of its operations on Sept. 6.
The split into two independent entities — with Open Range continuing its focus on exploration and production in the Deep Basin region of west central Alberta — was effective Nov. 1 and shares in Poseidon began trading on the Toronto Stock Exchange on Friday.
Under the arrangement, former shareholders received one post-split Open Range common share and about 0.9 of a common share of Poseidon.
“Key to this realignment was the initiation of a dividend of
.09 a month or $1.08 annually,” Mr. Daunheimer said. “Based on the current Poseidon Concepts share price, this implies a 9% current yield.”
But limited barriers to entry in the fluid storing game could be a headwind, he cautioned.
“Poseidon has proved to be a cash-flow generating machine and with low initial costs, we expect competition to surface at some point; although deep market penetration has mitigated this concern somewhat,” he said.
Shares of the newly constituted company closed at $11.52 on the TSX on Friday, the first day of trading.