National Bank Top Pick National Bank Financial analysts Travis Wood and Dan Payne expect a “relatively uneventful” earnings season the Canada’s energy sector.
“Commodity prices remained volatile during the quarter in the face of ongoing macro stress (i.e., tightening monetary policy, bank failures, etc.), resulting in downward pressure on benchmarks and E&P equities through the quarter,” they said. “Despite the slower-than-expected start to the year and an expectation for continued macro-driven price volatility, we reiterate our view of a structurally supportive outlook that is further underpinned by business models which are sensitized and positioned to withstand sustained price shocks. As such, we continue to believe the volatility in equity prices provides an opportunistic window to buy quality companies at an attractive value. Some opportunities possess top-tier assets (including depth of inventory) to support organic profitable growth and return of capital initiatives, all the while trading at approximately 3.0-4.0 times EV/DACF [enterprise value to debt-adjusted cash flow and FCF yields in the range of 10-15 per cent. ... Top Picks — CVE, WCP, CPG, ERF, HWX, TVE, TOU.”
In a report released Tuesday, they made several target price adjustments to account for “a dynamic combination of company-specific idiosyncrasies and macro developments.”
For large and mid-cap stocks, notable changes include:
- Advantage Energy Ltd. (“outperform”) to $12 from $15. The average is $12.43.
- ARC Resources Ltd. ( “outperform”) to $18.50 from $20. Average: $21.86.
- Birchcliff Energy Ltd. (“outperform”) to $10 from $11. Average: $10.83.
- Crescent Point Energy Corp. ( “outperform”) to $18 from $16. Average: $14.86.
- Freehold Royalties Ltd. ( “outperform”) to $19 from $20. Average: $19.98.
- Kelt Exploration Ltd. ( “outperform”) to $7 from $7.50. Average: $8.
- Meg Energy Corp. ( “sector perform”) to $29 from $26. Average: $26.13.
- NuVista Energy Ltd. ( “sector perform”) to $14.25 from $16. Average: $15.94.
- Paramount Resources Ltd. ( “outperform”) to $40 from $37.50. Average: $40.47.
- PrairieSky Royalty Ltd. (“sector perform”) to $23 from $25. Average: $25.32.
- Tourmaline Oil Corp. ( “outperform”) to $80 from $90. Average: $84.14.
- Vermilion Energy Inc. ( “outperform”) to $26 from $29. Average: $28.58.
- Whitecap Resources Inc. ( “outperform”) to $16.50 from $15.50. Average: $14.52.