Novus Energy Inc.
Tuesday’s close: $1.03, down 7 cents, or 6.3 per cent
52-week trading range: 60 cents to $1.13 a share
Annual dividend: none
Analysts’ ratings: There were 9 buys and 2 holds, according to Bloomberg data. Target prices range from $1.10 to $1.45 a share.
Recent history: Shares of the junior oil company focused on Saskatchewan’s Viking play have climbed 32 per cent this year. The stock plunged to a 52-week low in June as the price of oil fell to $80 (U.S.) a barrel, but has rebounded as the commodity climbed back to the $88 level. Speculation that Novus Energy could be a takeover target has also helped to fuel its shares. In releasing its third-quarter results recently, Novus Energy finally signalled the company was effectively up for sale by announcing that its board of directors was considering ways to increase shareholder value. Its chief executive officer Hugh Ross is familiar with the drill. He ran oil-focused Gentry Resources Ltd. before it merged with Crew Energy Inc. in late 2008.
Outlook: Novus Energy announced Tuesday that it has hired Cormark Securities Inc. and FirstEnergy Capital Corp. as its financial advisers to help its board look at strategic options, including a sale. It will be opening a data room for potential buyers. “We bought shares of the company in September believing...this would potentially be an acquisition target,” said Andrew McCreath, chief executive officer at Forge First Asset Management Inc. “There is a lot of appetite for these Viking assets generally, and especially in Saskatchewan. We believe that during the first quarter of calendar 2013, the company will in fact get sold. We have a target price of $1.25 a share.”
Possible suitors for Novus Energy, which is drilling in the Dodsland Viking area, could include publicly listed energy firms like Whitecap Resources Inc. and Raging River Exploration Inc. or privately held Teine Energy Ltd., which is backed by the Canadian Pension Plan Investment Board, he said. NAL Resources Management Ltd., the oil-and-gas investment arm of Manulife Financial Corp., could also be a potential buyer too, he added.
The net asset value (NAV) of Novus Energy is estimated at around $1.30 per share, Mr. McCreath said. “Its balance sheet is reasonable. The company is expected to end 2012 with about $78-million in debt, and cash flow next year is expected to be approximately $60-to $65-million.”
There are many players in the popular Viking Saskatchewan play, including Renegade Petroleum Ltd, which just acquired assets in the area, Mr. McCreath said. “It’s light oil, and the netbacks [operating cash margin for every barrel sold] tend to be pretty darn high.”