Canaccord reportVery positive report and reiterated a $14.50 target price. Good news on the financing and production side of things.
"Production levels trending towards the high-end of guidance range; public IG rating opens door to lower cost of debt 1,969.40 595.9 6,155.8 0.73 7.1 Aug-24 Sep-24 Wednesday morning, WCP provided an operational update, a public investment grade credit rating, and closing of a new unsecured credit facility. Highlights from the release: Operational update. In the field, production levels remain strong with the company anticipating its 2024 average production to be at the high-end of its guidance range of 167,000-172,000 boe/d (in line with our 171,733 boe/d estimate). At Musreau, WCP recently brought its third four-well Montney pad online and is drilling its fourth pad. With strong condensate volumes, the company has reached design condensate capacity of ~11,000 bbl/d at its 05-09 battery, while given current CGRs, gas throughput sits at ~80% of nameplate capacity with total production at ~17,500 boe/d. The first two Musreau pads continue to outperform, averaging 1,573 boe/d (71% liquids) per well and 1,050 bbl/d of condensate on an IP-120 basis, while its third pad is currently producing at restricted rates given the capacity limitation at the 05-09 battery. At Kaybob, the three-well 11-34B Duvernay pad was recently brought online with an IP-90 of 1,428 boe/d (34% liquids) per well, in line with expectations. The five-well 11-14B Duvernay pad, WCP's pilot with a new well placement configuration to minimize inter-well connectivity, has recently been frac'd with results to come. At Lator, the company completed drilling on its first and is underway on the second of its two-well delineation program with results expected in Q1/25. WCP is progressing in attaining regulatory approvals and optimal designs for its Phase 1 Lator infrastructure developments. Production from the conventional assets continues to perform well with the company focusing on improving capital efficiencies. WCP recently drilled its second monobore Glauc well which lowered costs ~10% per well with two more monobore Glauc wells slated before year-end. Initiatives to improve efficiencies across its SK assets include drilling two open-hole, multi-lateral (OHML) wells before year-end. The first was drilled in SESK, targeting the Frobisher, and was recently brought on production. If deemed successful, WCP believes the OHML wells could add another two to three years of inventory in SESK. The second OHML well was recently spud in the Viking in western SK. Credit facility and investment grade rating. WCP entered into a new $2B unsecured, covenant-based credit facility, replacing its existing secured credit and term loan facilities. The new facility bears covenants of (1) total debt/EBITDA <4.0x; (2) EBITDA/interest expense >3.5x; and debt/capitalization of <60%. The company also announced a new public investment grade rating of 'BBB (low)', which will allow it to access the IG bond market. Valuation and recommendation.
We reiterate our BUY rating and price target of C $14.50, which maps to a 2025E EV/DACF of 5.1x. This compares to the 3.7x multiple WCP currently trades at and the group average of 3.4x"