Another positive, but conservative, assessmentCanaccord Genuity:
"Acquisition of VII in the books; go-forward guidance suggests material FCF ARX announced Q1 results that were ahead of expectations, as production and cash flow both bettered analyst expectations. Production was up from Q4 levels despite planned downtime at two of its oil-weighted properties. Cash flow for the quarter was boosted by strong winter gas prices, which included material pricing spikes in US daily gas prices, as winter storms plagued much of the US in February. ARX’s acquisition of VII closed on April 6. With its Q1 release, the company provided updated guidance to include the acquisition. Production expectation of 290,000 to 305,000 was right in line with our estimates, albeit on a lower capital program than we had forecast. The result is an increase in our FCF estimate, which is now ~$1.0Bln for the year, representing a FCF yield of 17% on ARX’s current market cap. We continue to rate ARX a BUY and have increased our target to $10.50 (from $9.50) on the back of the increase to our FCF expectations. Our target is NAV based and maps to a 2022E EV/DACF of 3.5x (vs 3.5x previously). We continue to believe ARX shares are materially undervalued (trading at just 2.8x 2022E EV/DACF vs peers at 3.5x) and are a compelling way to gain exposure to a rebounding Canadian energy sector."