Obviously TD has factored in the $9.50 special dividend to their target while the others have not. GLTA
Calling it “another successful conquest,” Desjardins Securities analyst Chris MacCulloch thinks Spartan Delta Corp.’s is continuing to deliver shareholder value with the Crescent Point deal.
“Last fall, SDE outlined plans to revaluate the corporate asset base through a strategic repositioning process,” he said. “With [Tuesday’s] disposition and spinco announcement, the company retained its highly opportunistic stance by capitalizing on another counter-cyclical window of opportunity, having now completed 12 transactions since inception in late 2019. Since then, SDE has raised $537-million of equity at an average price of $3.16 per share, which implies more than 300-per-cent cash return in less than three years when factoring in the previously distributed 50 cents per share special dividend (paid in January) and yesterday’s announcement of a $9.50 per share sale dividend and a 10-cents-per share special dividend. And that is excluding residual value for SDE and Logan Energy!
“The Alberta Montney disposition, which is expected to close in May, includes 377 (362 net) sections of land at Gold Creek East, Gold Creek West and Karr. The assets were recently producing 33,200 boe/d (56-per-cent oil & liquids) and include all associated facilities and gathering systems. Notably, the disposition also comprised all tax pools associated with the Gold Creek and Karr lands, although SDE still expects to remain tax-free until late 2024 or early 2025 based on current prices. More importantly, the transaction was completed at a favourable cash flow multiple of 3.5 times, which is consistent with other recent Montney asset sales despite recent commodity price softness amid a global banking crisis.”
Reiterating a “buy” rating for Spartan shares, Mr. MacCulloch cut his target to $19.50 from $22.50 to “reflect reduced upside within the context of our bullish 2024 oil price deck.”
“In our view, management has done an admirable job crystallizing value, the lion’s share of which will be returned to shareholders via special dividends. We also like the improved corporate focus provided by the spinout of high-growth Montney assets into Logan Energy,” he added.
Elsewhere, TD Securities’ Aaron Bilkoski downgraded Spartan Delta to “hold” from “buy” with a $6.50 target, dropping from $20.
Others making target changes include:
* Scotia Capital’s Cameron Bean to $21 from $23 with a “sector outperform” rating.
“We view SDE’s asset sale and spin-out transactions as a positive for the company’s shareholders,” said Mr. Bean. “1) The Montney asset sale captured a sizable chunk of the full SOA value we ascribed to the assets (despite a deteriorating macro environment and weakening commodity prices) – and that value will flow directly to SDE shareholders as cash , 2) the Deep Basin focused SDE looks to be a free cash flow machine poised to return more cash to shareholders (dividend estimates TBD). 3) The spinco (Logan Energy Corp. or “Logan”) offers exposure to intriguing Montney growth assets. We have made preliminary updates to our full suite of SDE estimates and created a preliminary stub model for Logan. Adding all the pieces back together shifts our Target Price to $21 per share (down slightly with all the moving pieces). Importantly, if we assume $9.00 per share PV for the special dividends (rough estimate for risk and time value of money), SDE’s current share price shrinks to $5.78 per share for the continuing Deep Basin focused company (2.7 times our 2024 DACF estimate on strip or 12.1-per-cent FCF estimated yield) and an essentially free option on Logan (we estimate a 93 cents per share 10-year NAV). Overall, we see this as a positive outcome and remain bullish on the stock.”
* Raymond James’ Jeremy McCrea to $19 from $18 with an “outperform” rating.
“Spartan has been one of the most aggressive acquirers in the CDN E&P space over the last couple of years, which led to building one of the largest undrilled Montney positions for a mid-cap company,” he said. “[Tuesday] SDE announced the successful conclusion of its repositioning plans through the sale of its core Montney assets to Crescent Point Energy for $1.7 bln and a spin-out of its growth-focused Montney assets to Logan Energy (a newly formed entity) - of which proceeds will be returned to shareholders. Going forward, Spartan is still a 40,000 boe/d company, with highly economic conventional Spirit River assets. With limited infrastructure spending required, the company should generate higher excess free cash flow, which ultimately should lead to a premium dividend yield. Although new guidance and some other details have yet to be released (and why we think share price was only up 7 per cent), management is doing what they have always done, and that’s creating value for shareholders. We suspect Logan should see a premium valuation when it becomes tradable which provides more upside than what’s reflected in the stock today.”
* Stifel’s Cody Kwong to $18 from $20 with a “buy” rating.
“We believe the share price could have immediate upside potential to $15.00-$15.50 per share (at strip), while our 12-month view frames a new target price of $18.00 per share,” said Mr. Kwong.