TP&H Upgrade 09:39 AM EST, 02/11/2022 (MT Newswires) -- Tudor, Pickering and Holt on Friday reiterated its buy rating on the shares of ARC Resources (ARX.TO) but bumped its target price to C$18.00 from C$15.00 after the Western Canadian oil and gas producer reported fourth-quarter results that topped market expectations.
"We expect last night's release to be positive for shares, with a healthy cash flow beat driven by stronger than expected realized pricing somewhat offset by higher than expected capital spending in the quarter, as capital was pulled forward from the 2022 budget," analyst Matt Murphy said in a note. "For the quarter, cash flow of C$1.19/shr handily beat the Street at C$1.13/shr (TPH C$1.07/shr), with the delta vs. our model driven by a combination of higher realized gas pricing (C$6.45/mcf vs. our modeled C$5.41/mcf) and better opex, while volumes of 346mboepd came in just ahead of the Street at 343mboepd (TPH 345mboepd). Capital spending in the quarter totaled C$375MM, ahead of the Street at C$304MM (TPH C$315MM) as the company pulled forward C$50MM from the 2022 capital budget to secure long-lead items for Attachie West Phase 1, driving free cash flow in the quarter of C$459MM - below the Street at C$501MM. As a result of the increased spending in Q4'21, full-year 2022 capital spending guidance has been revised downward by C$50MM to C$1.15B-$1.25B (TPH C$1.29B/Street C$1.27B). On the returns front, we model ARX repurchasing C$960MM in shares through 2022, with a 7.5% NCIB estimated when the current program expires at the end of Q3'22. Combined with a modeled 10-15% mid-year dividend increase, we model a 14% total capital return yield or 53% free cash flow payout within the company's 50-80% framework, leaving plenty of room for increasing returns to shareholders throughout the year on the current strip."
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
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