(By Balaseshan) CIBC World Markets Inc. analyst Ian Macqueen upgraded the rating of C&C Energia Ltd. (TSE: CZE) to "sector outperformer" from "sector performer" and increased his price target to C$10 from C$8.75.
The company's Q3 2012 average production and sales were pre-announced at 11,424 Bbls/d and 13,639 Bbls/d, respectively, but actual sales were 14,445 Bbls/d, as the company sold additional inventory, Macqueen noted. As a result, Q3 2012 cash flow per share was $1.00, above his $0.87 estimate and consensus of $0.85.
Management forecasts 2012 average production at 10,800 Bbls/d, slightly below the analyst's estimate of 10,900 Bbls/d. However, management expects to reduce oil inventories from 207 MBbls at September 30 to 100-125 MBbls by year-end 2012, which could add about 1,000 Bbls/d in sales volumes in Q4 2012.
For 2013, guidance has been set at 11.8-12.1 MBbls/d, representing a 9 percent to 12 percent increase year-over-year. Macqueen has included three recent discoveries in his production model (Saimiri, Heridia & Guacharrios), leading to an increase in his 2013 production forecast from 10.3 MBbls/d to 11.8 MBbls/d.
The analyst said CZE is gaining some operational momentum. Changes to his model have resulted in a 14 percent increase in his risked net asset value (NAV). CZE is trading well below core NAV (C$8.43/share) and at 2.6 times 2013 cash flow.
The brokerage raised its 2012 cash flow per share estimate to $2.68 from $2.39 and its 2013 estimate to $2.51 from $2.10.
CZE is trading down 2.06 percent at C$6.65 on Tuesday.