Baytex Energy raised to "outperform"
2023-03-02
ATB Capital Markets analyst Amir Arif has elevated his recommendation for Baytex Energy to "outperform" from "sector perform." Mr. Arif has an unchanged share target of $8, two cents under the consensus. Mr. Arif says Baytex shares on Wednesday pulled back following the news of its deal to buy Ranger Oil creating an enticing opportunity for investors. Mr. Arif says in a note: "We view the weakness in the stock price as a buying opportunity in what we believe is an improved Company with better margins, better growth options, and a better FCF profile on an absolute and a per share basis, while the deal being accretive on an EV/EBITDA basis as well. We believe the weakness is related to ROCC shareholders, who will own 37 per cent of the pro-forma share count, hitting the bid and not necessarily wanting to own a larger diversified Canadian producer relative to the U.S. focused single basin play that Ranger Oil was. Additionally, some existing Baytex shareholders could be surprised and disappointed on the acquisition given Baytex's previous strategic focus on debt reduction as a path to improving FCF returns."