RE:TD Securities Raised Target This AMSome details:
Event
Legacy reported in-line operating and financial results for the second quarter, underscored by production of 18.2 mBOE/d and CFPS of $0.46 (consensus at 18.0 mBOE/d and $0.45/share).
In our view, Legacy continues to improve its operating efficiencies, supported by enhanced well performance, reduced drilling times and improved costs across its core plays. We believe that management is focused on sustainable production growth, while improving financial flexibility, which could eventually support a dividend-based business model (in our view). Based on our 2013 estimates, Legacy is on track to post the lowest annual corporate payout on record at 109%, while posting year-over-year growth of 17% (-10% per debt-adjusted share).
Given Legacy’s weighting to light oil, its leverage position and the strength of the forward strip through 2013, we believe that the company offers a compelling value-based investment for investors in pursuit of oil exposure. We reiterate our BUY rating, but have increased our target price to $7.50/share, from $6.50/share previously.
TD also increased their cash flow estimates for 2014 from $1.81 to $2.03 fully diluted.
They are especially encouraged by reduced operating costs contributing to increased netbacks before any improvements in revenue strips.
Terr