Union Securities Broker note by Warren Verbonac based on canadian TSX.
Ithaca Energy – Highlights
10-Jan-11 Stock Rating: Strong Buy Target Price: $3.50 (was $3.00)
Comment: “Ithaca’s production averaged 4,148 boed in Q4 2010, down 15% from the prior quarter. Production Averages 2010, boed / Q4 4148 / Q3 4862 / Q2 4914 / Q1 4193 Considering the latest quarterly production included some minor amounts from the recently closed acquisitions of the Anglia and Topaz fields, the drop in production may be somewhat disappointing for the market. Oil prices held up relatively well, at US$83.83/b in October, and US$89.86 in November. Our previous cash flow forecast of US .11 for Q4/10 was based on a slight increase in production to 5,000 boed; with the lower production, we expect the Company to report cash flow of US .09 for the quarter, and US .45 for the full year. The Company’s cash flow guidance for 2011 is US$100-115 million, or approximately US .42 per share.
Recent strength in the stock price reflects the large increase in production that is anticipated towards year-end 2011, when the Athena oil field commences production and contributes 5,000 bd net to Ithaca’s 22.5% interest. Workovers in the Beatrice field will also sustain production for 2011. Ithaca’s production is forecast to more than double to over 12,000 boed in 2012 from the addition of the Athena oil field, and gas from Carna (16% interest), Stella and Harrier. Cash flow in 2012 could increase to C .65 per share, and we believe the stock can trade as high as $3.50 based on the upcoming growth, and more or less maintaining the current cash flow multiple. The 2010 year end reserve report will also likely support an asset value well in excess of $3.50.
Valuation and Recommendation:
The stock is trading at 6.3 times our 2011 cash flow estimate of C .43, and at 4.2 times our 2012 estimate of C .65. We are maintaining our Strong Buy recommendation and increasing our target to $3.50.” END.
$3.50 based on current f/x equals around 226p. That presents a decent 32% upside from today’s levels (170p). It’s nice to Brokers raising estimates.
Also, worth noting was market call program last Friday evening with Bruce Campbell taking about IAE on BNN.
The BNN clip starts at the beginning of Part 6 of Market Call Tonight.
Summary of Bruce Campbell’s comments on IAE:
– recently purchased at $2.15 to $2.25, even bought some today on the dip
– has pretty big production gains almost guaranteed to be coming in late 2011 into 2012 and 2013
– very cheap; stock could double from $2.40 and get to $4.50-$5.00 in a couple years
– management is solid