Bullboard - Stock Discussion Forum Athabasca Oil Corp T.ATH

Alternate Symbol(s): ATHOF

Energy Oil & Gas E&P

Athabasca Oil Corporation (AOC) is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. AOC’s segments include Light Oil and Thermal Oil. The Thermal Oil segment includes the Company’s assets, liabilities and operating results for the exploration, development and production of bitumen from sand and carbonate rock formations located in the... see more

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Athabasca Oil Corp > TD Raise Target

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Post by retiredcf on Jul 25, 2024 8:16am

TD Raise Target

From $5.50 to $6.00. GLTA

Q2/24 RESULTS TOP STREET; LEISMER EXPANSION TO 40MBBL/D SANCTIONED AS EXPECTED

THE TD COWEN INSIGHT

Q2/24 results reflected another strong quarter of operating performance, prompting a +1mboe/d guidance revision, and delivery on RoC commitments through mid-year. As was largely expected following TMX ramp-up, ATH sanctioned the second-leg of Leismer growth to 40mbbl/d by 2028. ATH also delivered strong DEC well results which, in our view, could serve as a near-term catalyst alongside Leismer.

Impact: POSITIVE

Sanctions Leismer growth to 40mbbl/d, as we had expected: Management has remained steadfast in having certainty around TMX start-up (and successful ramp-up) before sanctioning the 12mbbl/d expansion to 40mbbl/d. With TMX now at ~80% utilization and Leismer production hitting 28mbbl/d in June, we are not surprised that ATH is committing new growth capital.

First production is expected in 2026 with ramp-up through 2028, as it will be completed in stages. We like the staged approach as it provides 'off-ramps' should macro headwinds arise, protects the balance sheet, and maximizes FCF for buybacks.
New growth capex is being deployed immediately, with ATH raising 2024E thermal capex budget 43% to $193mm from $135mm. The $25,000/bbl/d capital efficiency ($300mm total) is in line with our previous estimate, although we had expected initial spending in early 2025.

Importantly, 2024E FCF guidance falls only $15mm despite the $58mm capex increase (on lower power/natural-gas price assumptions).

Exits Q2/24 with $125mm net cash; continues to aggressively repurchase stock: YTD, ATH has repurchased ~$173mm in shares, with ~$77mm of this total completed in Q2/24 (68% of Q2/24 thermal FCF vs. 100% target; 97% through mid-year).

Production handily beats consensus, driving strong AFFO beat (Figure 1): Production of 37.6mboe/d beat consensus of 36.7mboe/d (TD estimate: 37.2mboe/d; +1%), driving AFFO of $166mm, similarly ahead of consensus/TD at $155mm/$159mm. The beat vs. our estimate was primarily driven by lower cash opex/royalties.

DEC Duvernay production averaged 3.9mboe/d, up 100% q/q as five wells were brought online. The two operated wells boasted restricted IP90s of 1,000boe/d (86% liquids), while the three non-operated wells reported average IP60s of 1,000boe/d (87% liquids).
ATH boosted 2024E production guidance 1mboe/d to 36.5mboe/d (midpoint) vs. our prior 36.1mboe/d estimate.

Although longer-dated, Corner sanctioning potentially on the horizon: Facility cost estimates are currently being finalized, and ATH is exploring external funding options. Critical to the FCF story, ATH is not planning to fund Corner using "existing CF or balance-sheet resources".