Revised Targets Continuing to “accretively expand in to the heart of the Clearwater to significantly bolster its long-term value proposition,” National Bank Financial analyst Dan Payne thinks Tamarack Valley Energy Ltd. is “defying the odds and coming out on top.”
Resuming coverage following its $1.4-billion deal for Deltastream Energy Corp., he said the Calgary-based company is gaining a “significant & scalable inventory of opportunities” in a key region of the Clearwater heavy oil play, calling it a “best in class asset acquisition.”
“The acquired assets add high-returns within the heart of the Clearwater fairway at Marten Hills, Nipisi & Canal, expanding the company’s dominant position as the largest operator in the project, where scalable assets with high-velocity of recirculation of capital (backstopped by infra.) and upside from waterflood, significantly carries the long-term value proposition,” said Mr. Payne. “Proforma, the company’s balanced & return-focused strategic-orientation will be augmented, with a view towards delivering ‘23 production of 70 mboe/d (83-per-cent liquids) on the basis of a less-than $450-million capital program that is derived within a less-than 40-per-cent payout (30-per-cent free cash yield implied).
“Priorities of free cash (in addition to long-term 2-3-per-cent growth) will remain through an increased cash dividend and 4-per-cent cash yield ($0.15 per share, up 25 per cent), repayment of associated obligations (18-per-cent payout) and enhanced returns. Its expanded cash dividend and long-term enhanced returns are secured through $500-600-million annual FCF (the latter to come past H2/23).”
Mr. Payne has an “outperform” recommendation with a $9 target, up from $8 previously, for Tamarack Valley shares. The average on the Street is $7.60.
“Pro-forma the transaction we see the stock offering a 70-per-cent return profile (vs. peers 34 per cent) on leverage of 0.5 times D/CF [debt to cash flow] (vs. peers negative 0.1 times), while trading at 2.0 times EV/DACF [enterprise value to debt-adjusted cash flow] (vs. peers 1.8 times),” he said.
Elsewhere, others making changes include:
* CIBC World Markets’ Jamie Kubik to $6 from $6.50 with an “outperformer” rating.
* BMO’s Mike Murphy to $5 from $6 with a “market perform” rating.