(By Balachander) CIBC World Markets Inc. upgraded its rating on shares of Parex Resources Inc. (TSE:PXT) to "Sector Outperformer" from "Sector Performer" on expectations of positive news flow and an incorporation of additional production volumes in its model.
The Canadian oil and natural gas explorer issued an operational update ahead of its AGM on May 23. After two negative releases and two share price corrections on Feb 15 and April 12, CIBC believes that the bad news is out of the stock and it is set to regain some of its losses.
In the May 23 update, the company indicated that two exploration wells have tested at >2,000 Bbl/d on limited tests and another three exploration wells have encountered pay in multiple zones and are scheduled to be perforated and tested in the near term, CIBC noted.
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The brokerage is of the view that the company is highly dependent on exploration success in 2012 but activity is underway which could add significant production and reserve value over the coming months.
CIBC maintained its price target of $9 and 2012 and 2013 EPS estimates of US$2.30 and US$1.08, respectively.
Parex Resources is engaged in the exploration, development and production in South America and the Caribbean region. It has a portfolio of prospects in the prolific Llanos Basin of Colombia and onshore Trinidad and Tobago.
The stock, which has been trading in the 52-week range of $4.67 to $8.67, added 1.42 percent to trade at $5.73 on Tuesday.