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Stifel, Casimir retain "buy" rating on Whitecap Resources' "flight to quality" after acquisition

Stifel, Casimir retain "buy" rating on Whitecap Resources' "flight to quality" after acquisition


Whitecap Resources (TSE:WCP) had its stock rating and target price retained at Stifel Nicolaus and Casimir Capital after the oil and natural gas explorer operating in Western Canada announced the Dodsland Viking light oil acquisition, $110 million financing and raised its 2013 outlook.

Stifel Nicolaus Canada maintained its "buy" rating on the stock and its target price of C$13.50 a share, saying the company is "trying to trim the current speed with the Waterflood acquisition."

"The strategic importance of this asset appears to be an effort to further dampen the overall decline of the company, from 30 percent towards 26 percent in 2014 and 23 percent in 2015, as well as the free cash flow generated over and above the cost to grow the asset," Stifel's analysts Michael A. Zuk and Patrick J. O'Rourke wrote in a emailed note received on Tuesday.

The Dodsland Viking has current production of 900 barrels of oil equivalent per day and a low base decline rate of 20 percent. The deal is valued at $110 million, to be funded through a $90 million bought deal equity financing and $20 million CDE.

The company raised its guidance for its average oil and natural gas production by 5 percent to between 17,800 and 18,000 barrels of oil equivalent per day.

Whitecap's shares rose on Tuesday to their highest intraday price in more than a year, gaining as much as 2.1 percent to C$10.32 in afternoon trading in Toronto. The stock has gained approximately 19 percent so far this year.

Whitecap’s stock "has outperformed many of its peers over the past six months in what we have broadly categorized as a ‘flight to quality’ for a management team, assets, and balance sheet the street believes in and can support," Stifel wrote.

Casimir Capital also maintained its "buy" recommendation and target price of C$11.50 a share, citing "solid results".

"The acquisition benefits from facilities and pipeline infrastructure synergies, being located ~16km away from Whitecap’s existing operations at Lucky Hills," Casimir's Ryan Galloway wrote in an emailed note.


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