(By Balaseshan) CIBC World Markets Inc. analyst Ian Macqueen downgraded his rating for Pacific Rubiales Energy Corp. (TSE:PRE) to "Sector Performer" from "Sector Outperformer" with a $28 price target.
Macqueen downgraded PRE due to recent out-performance relative to its peer group and an expected lack of production and reserve growth in 2012. It has been a challenging year for PRE as production growth has been hampered by permitting issues.
Over the last year, PRE has grown production by 3.2 percent from 88.1 MBoe/d in Q2 2011 to 90.9 MBoe/d in Q2 2012. The analyst estimates 2012 average production at 95.9 MBoe/d (11 percent year-over-year growth versus management guidance of 15 percent to 35 percent), incorporating 5 percent sequential growth in Q3 2012 and 10.2 percent sequential growth in Q4 2012.
Macqueen said his growth forecasts for the second half of 2012 are aggressive; any further permitting issues could cause downward revisions. He also expects that permitting issues will have an impact on 2012 reserves growth and forecasts modest 2P growth of 3 percent to 5 percent year-over-year, mostly resulting from acquisitions.
The analyst said PRE trades at 87 percent of its risked net asset value and has a 2013 price/cash-flow ratio multiple of 5.3 times, versus the group averages of 81 percent and 4.1 times, respectively.
PRE is trading down 1.55 percent at $23.45 on Tuesday.