Bellatrix Exploration Ltd (TSE:BXE), the Alberta-focused energy producer, is rated 'neutral' by broker Eight Capital after its fourth quarter earnings.
It targets C$1.60 for the shares, which is a fair distance, from where they are today, at C$1.43 a throw, down around 3%.
The firm has assets in west central Alberta (Spirit River and Cardium formation), and has continued to focus on bringing down the cost of its drilling programme, with Spirit River wells drilled so far in 2018 coming in at C$3.5mln compared to C$3.8mln in 2017.
Slight outperformance..
Production in the fourth quarter showed some slight outperformance to the previous company estimate, noted analyst Adam Gill.
It was 37,077 Boe/d (barrels of oil equivalent per day) against guidance of 36,500 Boe/d. Notably, 74% of this was natural gas.
Cash flows of C$15.7mln or C$0.32 per share were 9% better than our forecast of C$14.4mln or $0.29 per share and consensus of C$0.30 per share.
Production in the fourth quarter 2017 was consistent with the third quarter last year.
"Bellatrix posted cash flows that came in 9% better than was forecast as well as being ahead of the street's expectations," said Gill.
High leverage remains challenge..
"While the high leverage remains the challenge to be resolved, we do see this as a positive given the company's track record of typically coming in below expectations."
Gill noted that for 2018, Eight Capital had made a slight reduction to its capital spending forecast given the cost savings while keeping production in line with the broker's previous expectations.
That said, it is a small improvement while leverage (debt to share value) remains well above peer levels.
"Leverage does stand higher than the peer group, which we believe should drive a big discount valuation. Until the capital structure is addressed, we have a hard time seeing broad market support for this story," said the analyst.