RBC Raises Target RBC Dominion Securities analyst Michael Harvey expects focal points of the approaching earnings season for Canadian energy exploration and production companies, including growth expectations and return of capital programs, to “likely overshadowed in the near term by tariff concerns and other global macro risks.”
“Our checks through the pre-Q update resulted in minor revisions to our production outlooks, reflective of outages and select company specific factors ... Our updated estimates placing Q4/24 cash flow per share up 1 per cent/23 per cent quarter-over-quarter for oil/gas-weighted names, a reflection of commodity pricing and weakened Canadian dollar,” he said. “Our Q4/24 CFPS estimates are 2 per cent below consensus while production is in line .... While Q4 AECO prices mapped to $1.49/mcf (up 110 per cent quarter-over-quarterand down 35 per cent year-over-year), this was in part offset by diversified sales points, hedging, and liquids production.”
Mr. Harvey is now projecting 6-per-cent year-over-year aggregate production growth for both 2025 and 2026, which he sees leading to cash flows of $16.7-billion and $16.8-billion.
“We expect 100 per cent of our coverage universe to grow volumes in 2025/26E based on our current outlook,” he said. “While AECO gas prices remain very low and we have seen only selective shut-ins to date, we believe this is largely due to the expectation of higher winter pricing (implied by the strip) plus the effect of fairly robust liquids pricing and hedging.”
Also seeing return on capital as “top of mind,” Mr. Harvey made target price adjustments to five stocks in his coverage universe on Monday:
- Arc Resources Ltd. ( “outperform”) to $32 from $30. The average on the Street is $32.40.
- Kiwetinohk Energy Corp. (“outperform”) to $18 from $17. Average: $19.80.
- Paramount Resources Ltd. ( “sector perform”) to $34 from $37. Average: $39.19.
- Peyto Exporation & Development Corp. ( “sector perform”) to $18 from $17. Average: $18.55.
- Tamarack Valley Energy Ltd. ( “outperform”) to $5.50 from $5. Average: $5.75.
“Our top ideas include names that we believe are best positioned on operational sustainability, RoC metrics, and asset quality,” he said. “These include ARC Resources and PrairieSky Royalty , as highlighted in the latest iteration of RBC’s Global Energy Best Ideas list.”