fredag 13 maj 2016
Scotiabank höjer Canacol från 4.50 till 5 dollar
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May 12, 2016
Lower Cost, Higher Realized Pricing Underpin Positive Q1 Results
Yesterday after market, Canacol Energy released its Q1/16 results. Although the company’s recent operational updates (April 21 and 28) had limited the scope for surprises, we are reassured by better-than-expected results:
CFPS of $0.09 beat our estimate of $0.07.
Operating cost of $4.23/BOE was lower than our estimate of $6.18/BOE, and combined with higher realized pricing and lower royalties, resulted in a higher operating netback of $25.80/BOE versus our estimate of $23.01/BOE and contributed to a cash netback of $14.16/BOE, compared with our estimate of $11.55/BOE.
Net debt of $218 million compared with our estimate of $191 million, with higher-than-expected capital investment in Q1.
Capex guidance for 2016 remains at $58 million, and will mainly focus on exploration for additional gas reserves. The company has budgeted two gas wells for the rest of 2016, starting in Q3.
With gas sales having reached 90mmcf/d at the end of March, we await further updates on gas infrastructure projects which could provide the company with additional capacity (1 00mmscf/d in 2018 ) for selling gas into Colombia’s Caribbean coast.
We maintain our ACTION LIST BUY rating and C$5.00 target price.
We continue to be attracted to Canacol for its long-life reserves and resources with limited exposure to the global oil prices owing to its Colombian gas focus. The company has a clear road to significant cash flow growth, benefiting from the significant ramp-up in gas production, supported by strong demand for gas-fired power generation in the region. We also highlight that the company retains light oil upside that could be exploited in a sustained oil price recovery environment. Canacol is currently trading at a discount to the average of its closest peers in our coverage on Base NAVPS and EV/DACF metrics. We expect the valuation gap to reduce as the company demonstrates the strength of its Colombian gas business with a substantial increase in operating cash flows, as well as further upside in its Colombian gas portfolio.