08:29 AM EST, 11/04/2020 (MT Newswires) -- Tudor, Pickering & Holt on Wednesday reiterated its buy rating on the shares of Tourmaline Oil (TOU.TO) with a C$23.00 target price ahead of the natural-gas producer's third-quarter results, which are expected to be released later in the day.
"We see TOU's underperformance to start the week setting up opportunity into the print, with upside to Q3, the 2021 guide, and dividend expansion on the horizon," the investment bank said in a note. "For this afternoon's Q3 release, we're expecting CFPS of C$0.99, 3% ahead of the Street and yesterday's pubic data release continues to point to production in the 297mboepd range, in-line with consensus. A formal 2021 guide is also expected, with the Street currently sitting at 318mboepd/C$912MM and we see production upside towards the 325mboepd range on potentially lower capex as efficiencies continue to improve. Outside of a constructive release today, we also see a strong value proposition, with a TPHe 16% FCF yield in 2021 on strip (14% FCF/EV), 0.5x leverage and a 62% corporate payout ratio. The company has indicated dividend expansion as a priority for FCF, following annual increases in 2018 and 2019 and we see an outside chance that TOU completes the hat trick and bumps the div with today's release; otherwise expected early in 2021. Lastly, it's worth noting near-term weather patterns and the expected La Nina winter are both bullish for West Coast gas pricing, with TOU best positioned to capitalize."