Opinions
Steve MacInnes
Nuvista Energy Ltd
NVA-T
TOP PICK
May 15, 2008
Stock price when the opinion was issued
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We reiterate this Western Canadian energy producer as a TOP PICK. Management has the goal to achieve 100,000 boe/d by 2026 and sees a 10% growth in production in 2024. Hedging activity is assisting against lower natural gas prices currently. It trades at 8x earnings, 1.3x book and supports an 18% ROE. We continue to recommend a stop at $12.00, looking to achieve $15.50 --18% potential upside. Yield 0%.
(Analysts’ price target is $15.50)Some of the highest-quality Montney acreage. Oily, nat gas exposure. Growing production by about 50%. Trades at a 15% forward free cashflow yield, 75% going to investors, expected to go to 100% (making a 22% free cashflow yield). His target price is $22.50. No dividend.
(Analysts’ price target is $16.75)He may be early on dry gas producers. Here, you get the gas but also condensate. Condensate's needed for pipeline transport as oil sands slowly increase production. Canada's already short on condensate, so the premium's been extending. Growing production by about 50%, at which point it can keep production flat for 20-25 years. No dividend.
Shareholders are already getting 75% free cashflow. Meaningful share buybacks compress the multiple and drive the rerating. $20 target in 1 year, $26 in 2 years, so upside of 50-90%.
It takes discipline to not take profits too early and let your winners ride if the thesis is still playing out. The investor did well to do that, not many can.
Believes his firm is still the second-largest shareholder. Continues to drill exceedingly great wells. Perception of an inventory challenge, but he doesn't agree. Likes the newish CEO a lot. Low growth, but lots of free cashflow. Speculation that POU will buy it out, but he never owns on M&A spec.
She sold this a year ago. She expected after their spin-off to improve margins and product line, but the dental industry is cyclical and tied to the job market. As interest rates rose, many patients deferred treatment. Also, it's in a competitive market and growth was soft in some geographies. Wait and see how the new CEO executes.
Is a major shareholder. Is deep value here. They will grow production by 50% over 5 years while free-cash flowing 70-80% of their current market cap in that time. If/when they hit peak production of 120,000 barrels/day in several years, they can keep their inventory flat for 30 years while cash flow will be mind-blowing. He buys in every dip. He sees 50% upside in one year.