NBZ Q3
Quarterly results were in line with TD/Consensus expectations. 2016 capital and production guidance was provided ($100 million and 20,000 BOE/d, respectively); both were consistent with prior TD estimates. Bucking the trend from several companies within our coverage, Northern Blizzard elected to maintain the dividend (recall this was reduced in Q2/15 by 50% to $0.04/sh) as they find themselves well supported by the hedging in place through 2016 and strong SDP participation from major shareholders.
With the Q3 results in line and 2016 guidance consistent with our prior estimates, the focus shifts to Northern Blizzard's outlook in a currently challenging commodity price environment. As the beneficiary of a strong hedge book (~60% hedged) through 2016, as well as >70% SDP participation, the company finds itself well positioned entering an otherwise seemingly bleak 2016 for many industry participants.
Not only do we believe the current DPS is relatively safe given the previously noted support, but also believe that optionality exists within their asset base should commodity prices rise. Management noted that they are looking to be active in what is undoubtedly a buyers' market and are well suited to do so given they are currently undrawn on their $475 million credit facility. Moreover, on the conference call management suggested that if an opportunity to add an additional core area presented itself, the two majority shareholders would be supportive.
Our $8.00 target price and BUY rating are unchanged.