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All Eyes Remain on Strategic Process
Q3 results expected to have a muted effect; strategic process occupies focus
RPL is set to
report for Monday, November 18th before market open. We are
looking for production of 7,428 BOE/d and CFPS, f.d. of $0.12 while street
consensus expects 7,243 BOE/d and $0.13.
Renegade released an operational update on September 26th that quoted
current pr
oduction of approximately 7,550 BOE/d and previously stated current
production
as at August 8th of
7,400 BOE/d, which we believe supports our
current assumptions.
Strategic alternatives remains our focus
Although we're not expecting any news from a
strategic alternatives perspective
to be announced we would certainly welcome additional clarity. Bud McDonald,
who previously resigned as Chairman of Renegade's Board of Directors stepped
completely off the Board completely on October 15, though we don’t
believe
there is anything incremental to read into his departure.
Although an executive search is underway with an established Nominating
Committee, we’re not sure shareholders will tolerate
an extended process and
may opt to agitate for a Special Meeting
of Shareholders to press for a more rapid
resolution.
Recommendation and Valuation:
We are reiterating our BUY recommendation with a revised
$1.45target price
.
The negative revision in our target price results from the company’s extensive
fixed price hedging program, which are in Canadian dollars.
Our target remains based on a 5.0 x 2014E EV/DACF multiple supplemented by
$0.43 of aggregate risked upside.
RPL currently trades at a 2014E EV/DACF
multiple of 4.5 x and $65,627
per BOEPD relative to our
dividend
paying
group
averages of
7.4
x 2014E EV/DACF and $101,849
per BOEPD.
We continue to view the company’s asset value favorably and expect that a
corporate/asset sale would garner metrics above those implied by the current
share price