(By Balachander) TransGlobe Energy Corp. (TSE:TGL) (NASDAQ:TGA) shares were initiated with a "Sector Performer" rating and price target of C$12 by CIBC World Markets Inc.
The brokerage said TGL trades at a premium to its peers. Better than expected exploration results should drive the stock higher, CIBC added.
"We are excited by TGL's near-term potential but, on a risked basis, we believe is fairly valued," CIBC wrote in a note. "On an unrisked basis we see 55 percent upside to our target ($12/sh risked vs. $22 unrisked)."
The brokerage said TGL has consistently shown low-cost growth. Management achieved a 41 percent CAGR in 2P reserves and a 38 percent CAGR in production over the past 5 years, adding 32.5 MMBbls of 2P reserves at a 5-year 2P FD&A cost of $6.47/Bbl. Using the $47.66/Bbl 2011 netback, TGL generated a 7.4x recycle ratio.
CIBC forecasts 2012 production at 17.9 MBbl/d, growing through development to 21.2 MBbl/d in 2013. Management believes it has the inventory to reach 34 MBbl/d in 2014 and could reach 40 MBbl/d by 2017. The brokerage sees TGL testing 39 MMBbl of risked resources by YE13 (141 MMbbl unrisked).
Calgary-based TransGlobe Energy is an oil and gas explorer focused on the Middle East/North Africa region with production operations in the Arab Republic of Egypt and the Republic of Yemen.
On the Toronto Stock Exchange, the stock shed 0.79 percent to trade at $11.36 on Friday. On the NASDAQ, shares fell 0.77 percent.