Desjardins Meanwhile, a US analyst was just on BNN stating the exact opposite. GLTA
Heading into earnings season for the Canadian energy sector, Desjardins Securities analyst Chris MacCulloch sees rising downside risk for investors in the short term.
“Gravol, anyone? It’s certainly been a wild ride in the energy sector, consistent with the broader financial market turmoil, as we enter 3Q22 financial reporting, which kicks off next week,” he said. Oil prices tumbled in the quarter as global economic prospects darkened following the fastest pace of interest rate hikes in a generation. Meanwhile, the bullish setup for natural gas appears to be reaching its zenith due to a fresh wave of supply, which has eroded most of the US storage deficit in recent weeks. Although softer commodity prices are obviously painful for producers, we believe they have been properly reflected in sector multiples, with most stocks still trading south of 3.0 times 2023 strip DACF [debt-adjusted cash flow] while offering FCF yields of more than 15 per cent. Despite the gloomy economic outlook, we expect commodity prices to remain well-supported over the next 12 months, which should result in continued sector outperformance.”
Updating his commodity price forecast and making “minor” reductions to his financial forecast, Mr. MacCulloch tweaked his targets for several companies in his coverage universe.
For large-cap stocks, his changes are:
- Arc Resources Ltd. (ARX-T, “buy”) to $25 from $27. Average: $24.52.
- Canadian Natural Resources Ltd. (CNQ-T, “buy”) to $94 from $97. Average: $94.81.
- Tourmaline Oil Corp. (TOU-T, “buy”) to $92 from $100. Average: $95.58.
For dividend-paying stocks, his changes are:
- Crescent Point Energy Corp. (CPG-T, “buy”) to $15.50 from $16. Average: $14.92.
- Enerplus Corp. (ERF-T, “buy”) to $20.50 from $21. Average: $23.46.
- Freehold Royalties Ltd. (FRU-T, “buy”) to $19 from $21. Average: $20.22.
- Peyto Exploration & Development Corp. (PEY-T, “buy”) to $18.50 from $19.50. Average: $18.
- Pine Cliff Energy Ltd. (PNE-T, “buy”) to $2.15 from $2.35. Average: $2.24.
- Topaz Energy Corp. (TPZ-T, “buy”) to $29 from $30.50. Average: $29.91.
- Tamarack Valley Energy Ltd. (TVE-T, “buy”) to $6.25 from $7. Average: $7.35.
- Whitecap Resources Inc. ( WCP-T, “buy”) to $14 from $15. Average: $14.93.