Southern Pacific Resource Corp STPJF

Target Cuts

[longrun]

Production delays and expectations for lower prices for bitumen in the coming year led FirstEnergy Capital Corp. analyst Robert Fitzmartyn to warn that the company could have trouble generating the necessary cash flow to service its debt, let alone fund further expansion.

 

In a research note published just before Southern Pacific disclosed its plan to explore strategic options, Mr. Fitzmartyn lowered his rating on the stock to “underperform” from “speculative buy”.

 

“In light of the capital structure undertaken to execute its business strategy, our fear is growing that there will be an outcome of little to zero residual equity capital,” he wrote. “There is simply too much risk to justify taking a gamble on this stock at this stage.”