retiredcf wrote: Following its “constructive” first-quarter results and recently announced disposition of non-core Saskatchewan assets for $600-million, Desjardins Securities analyst Chris MacCulloch reaffirmed Crescent Point Energy Corp. , now operating as Veren Inc., as his top pick in the small/mid-cap oil space.
“The company’s positive momentum continued in 1Q24 through strong operational performance and further advancement toward its $2.2-billion soft net debt target,” he said. “On the latter, progress was achieved through last week’s attractively priced $600-million disposition of its Battrum and Flat Lake assets, bringing the company within close reach of the $750-million disposition target outlined at the investor day presentation in late March. We expect the remainder to come from infrastructure transactions, potentially including assets acquired through the Hammerhead Energy acquisition, as previously hinted by management. However, we also would not be surprised to see some of the proceeds reinvested into the Montney, potentially through the addition of a fourth drilling rig, although this will be partially contingent upon further analysis on the impact of optimized drilling and completion design.”
Mr. MacCulloch sees Veren “well-positioned” to continue to trim its debt levels below the $2.2-billion target if development plans were to shift, noting “management highlighting on the conference call that it now sees $1.7-bilion as an ultimate floor, which we view as a 2026 event at current strip prices.”
“For reference, that debt level would provide considerable balance sheet flexibility to the extent that it implies 1.0 times D/CF at US$50/bbl WTI,” he said. “However, management also noted that it does not envision further acceleration of capital returns beyond the 75 per cent of FCF level (from 60 per cent currently) at that point, with a focus on pursuing other opportunities, including asset development, potential M&A and further debt reductions. One step at a time.”
He raised his target by $1 to $15, maintaining a “buy” rating. The average is $14.64.
In a separate note, Mr. MacCulloch raised his target for ARC Resources Ltd. target to $30 from $29, maintaining a “buy” recommendation.
“Although we have adjusted our 2Q24 production forecast to account for planned maintenance activity, volumes are expected to ramp in 2H24 prior to the commissioning of Attachie Phase I. While acknowledging that the stock has outperformed, we still view ARC as one of the best-positioned names in the sector, including as a potential acquisition target,” he said.