logo-loader

Vermilion Energy drops after Dundee cuts rating, lowers price target

Last updated: 09:17 11 Nov 2014 EST, First published: 10:17 11 Nov 2014 EST

investment_research_350_5462291873fc9

Shares of Vermilion Energy (TSE:VET) fell Tuesday after Dundee Capital Markets analysts downgraded the oil and gas firm's rating from buy to neutral, and lowered its price target, citing lower projected cash flows.

The Calgary, Alberta-based company, which operates in Australia, Canada, France, Ireland and the Netherlands, reported cash flow per share of $1.83 on Monday, ahead of Dundee's estimate of $1.68 and in line with consensus expectations of $1.85.

Total production of 49,920 barrels of oil equivalent per day was also in line with Dundee's estimate of 49,727 boe/d. Dundee said it made adjustments to its model to account for Vermilion's actual third quarter results and tightened full year production guidance.

The company also reported results from its first Duvernay well at Pembina, which was brought on stream and produced for 16 days at 2.2 million cubic feet per day and 180 barrels per day of natural gas liquids. 

"Although the well flowed at a lower rate than we had hoped, it demonstrated high pressure liquids-rich gas," wrote Dundee analyst Geoff Ready in a report released Monday.

"Results should improve as the company optimizes its drilling and completions. The second horizontal Duvernay well at Edson is expected to be on in late Q4/14."

Vermilion also bought a producing asset in the Powder River Basin in America for $11.1 million, with production of 200 boe/d and proven and probable reserves of 2.2 million barrels of oil equivalent. The land stretches across 68,000 acres and is 98 percent undeveloped, said Dundee.

The analyst also noted strong well tests in Europe, in line with the brokerage firm's estimates. In the Netherlands, it drilled the Diever-02 exploration well, which flowed at 25.7 million cubic feet per day, while the Z7a well in Germany was placed on production at 16.5 million cubic feet per day following the end of the third quarter.

"We are reducing our recommendation to NEUTRAL (based on return to our target) and our target price to $68.00/share (from $71.00/share) based on lower projected cash flows," wrote Dundee analyst Ready. 

Shares of Vermilion were down 2.2 percent at C$62.21 in Toronto on Tuesday as of 9:45am ET. 

Ramp Metals Launches Drilling Program in Pursuit of High-Grade Nickel in...

Ramp Metals CEO Jordan Black joined Steve Darling from Proactive to introduce the company to the public domain and share exciting developments in the mining industry. With a background as a geotechnical engineer and experience in venture capital, including a notable role in taking GoldSpot...

32 minutes ago