Coverage Initiated on 'Almost Famous' Energy Firm with Thermal Oil, Natural Gas Assets

Source: Streetwise Reports   04/18/2019

The reasons why this stock is attractive now are presented in a CIBC report.

In an April 16 research note, analyst Trevor Bolland reported that CIBC initiated coverage on Athabasca Oil Corp. (ATH:TSX; ATI:FSE) following its “major transformation over the past several years, which has substantially changed the outlook for the stock and gives rise to our constructive view.”

CIBC assigned to the corporation an Outperformer rating and a CA$1.35 per share target price that compares to CA$1.05, the current trading price. This discounted valuation, Bolland noted, makes it an advantageous time for investors to get into or build their position in the stock.

The analyst named three important factors that underlie CIBC’s positive thesis on Athabasca Oil.

One, the company is “uniquely positioned” among small and mid-cap exploration and production companies, Bolland described. This is due to its self-funded asset base, its thermal business with low declines and a modest sustaining cost and its high-quality, liquids-rich natural gas business that generates “peer-leading netbacks.”

Two, Athabasca Oil’s long-term sustainability is significantly improved after the company’s recent work to reduce its cost structure.

Three, the energy company has both short- and long-cycle growth assets, the combination of which affords “marked forward optionality,” Bolland noted.

Four, Athabasca Oil is now, for the first time, generating free cash flow. “Combined with an influx of cash from its recent midstream monetization,” explained Bolland, “it is in the enviable position of having excess cash to allocate to growth, share buybacks and/or debt reduction.”

Bolland concluded, “The company is deserving of a more in line multiple as the Street begins to recognize and properly value these enduring qualities” of its two business segments.”

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Disclosures from CIBC, Athabasca Oil Corp., April 16, 2019

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Important Disclosure Footnotes for Innergex Renewable Energy Inc.

• CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Athabasca Oil Corporation in the next 3 months.

( Companies Mentioned: ATH:TSX; ATI:FSE, )