Post by
red2000 on Mar 08, 2022 4:21am
Desjardins analysis Dec. 2021 - Jan. 2022
DEC. 2021 : ARC Resources Ltd. (ARX, TSX, Buy–Average Risk, C$21.00 target)
Jan. 2022 : Exhibit 1: Summary of our 12m target prices and recommendations
Ticker : ARX
Rating Old : 21.00 $ New : 25.00 $ Buy–Average Risk
(%) : ↑ 3.0% return (%) : 92%
Over the past three quarters, ARX has been diligently working on the integration of assets following the strategic combination with Seven Generations earlier this year. The deal provided ARX with increased scale and expanded capital allocation flexibility—both of which have significantly boosted its cash flow profile while providing additional diversification across the hydrocarbon value chain.
The company’s production profile is roughly 60% natural gas and 40% liquids, which provides exposure to both commodities. In our view, the stock is heavily discounted and the valuation does not reflect the fundamentals of a company that is highlighted by a strong cash flow profile, low debt metrics and a commitment to returning 50–80% of FCF to shareholders.
It is also worth noting that in November, the company announced a 52% increase to the dividend (current yield of 3.6%)—and there is visibility to further dividend growth in 2022.
While ARX remains poised to sanction Attachie pending regulatory approvals (which is likely a 2022 event), its commitment to returning FCF to shareholders remains unchanged. In other words, in the event of a positive regulatory outcome, the project will be funded using cash that would have otherwise been directed to paying down debt.
This ensures that shareholders will receive their returns as promised in 2022. And let’s be clear, the projected amount of capital spending on Attachie in 2022 is relatively modest (ie ~C$300m on a ~C$3.3b cash flow base) and the company already has a low D/CF of ~0.5x.
We also highlight that ARX is widely regarded as a leader in the industry in terms of both operations and ESG. Finally, the company recently announced a 150 mmcf/d supply agreement with one of the LNG Canada partners, with the potential to expand volumes in the future—a deal that was likely available only to large natural gas producers with an investment-grade credit rating (of which there are only three others in the WCSB). So while LNG Canada is not expected to start up until 2025 and the deal has no impact on 2022 estimates, it clearly demonstrates a longer-term strategic plan with respect to natural gas volumes. All told, we believe 2022 will be a solid year for ARX.
Comment by
red2000 on Mar 25, 2022 11:36am
Read it again ! As we can see, majority of analysts see ARX between 20$ to 25$ for 2022 !!! GL Longs and followers who bought it like me under 15,50$ !!! It's a 30% yield between 23$ and price so far today !!! Not bad !!! But don't forget be ready for some bumpy road period, until end of Russian conflict !!! I expect end of it probably mid may !