DesjardinsI previously had them at $13.50 so they must have very recently added $0.50 and now changed their mind. GLTA
Desjardins Securities analyst Chris MacCulloch said he was “initially a little taken aback by the negative response” from investors toward Whitecap Resources Inc.’s third-quarter results and 2024 guidance.
The company’s shares dropped 4.7 per cent on Thursday, underperforming his Canadian mid-cap oil-weighted peers despite reporting largely in-line results, including cash flow beat, and a budget for next year that also met production and financial expectations.
“The frosty reception appears to have been primarily driven by the 2024 capital budget release, which included upwards of $250-million of incremental spending relative to 2023 levels (at the top end of the range), partially a function of planned infrastructure investments as WCP continues laying the foundation for future expansions to productive capacity in both the Montney and Duvernay,” Mr. MacCulloch said.
“Regardless, we do not expect asset development to remain the sole focus of the story heading into 2024. With the company having now taken the better part of 18 months to fully digest last year’s strategically transformative acquisition of XTO Energy Canada, we expect WCP to resume looking for opportunities to build additional corporate scale while expanding its footprint in both the Alberta Montney and Kaybob Duvernay plays—potentially via strategic partnerships—but if necessary, through accretive M&A. With respect to the latter, we expect a strong emphasis on packages that include operated facilities given the company’s preference for owning and operating infrastructure, which could provide operational synergies and an opportunity to taper future infrastructure spending. Meanwhile, balance sheet support for planned organic growth and potential M&A opportunities alike remains solid, with net debt now tracking below the $1.3-billion corporate target and continuing to moderate.”
Seeing Whitecap “laying the foundation for Montney and Duvernay growth,” he updated his projections to account for the quarterly results, raising his capital expenditure assumptions as well as “modestly” reducing his production estimates.
“We retain our constructive outlook for WCP given its strong balance sheet and Montney/Duvernay drilling inventory depth,” he said.
Keeping a “buy” recommendation, he trimmed his target to $13.50 from $14. The average is $14.33.