It's been a long, bone-chilling winter. But what may be the bane of many Canadians' existence is welcomed heartily by the oil and gas drilling industry, which can easily move rigs into position when the ground is frozen solid.
Rig activity this season has indeed surpassed many forecasts, up 17 per cent year-to-date from last year, notes Canaccord Genuity analyst John Tasdemir. While depressed natural gas prices have diminished interest in drilling for that commodity, many producers have turned their focus to oil plays, aided by applying horizontal drilling technology.
To invest in the trend, Mr. Tasdemir suggests looking no further than North America's most active driller: Precision Drilling Corp. . He placed Precision today on Canaccord's "focus list," upgrading the stock to a top pick in the energy sector.
He likes Precision's valuation - at 5.4 times 2012 estimated enterprise value/earnings before interest, taxes, depreciation and amortization - given "its mix of high performance rigs, near-term earnings growth, and longer-term position as to capture market share with its new rigs technology." Peers Helmerich & Payne and Nabors Industries , by comparison, are closer to 6.1 times.
The company's financial numbers could improve "as PD benefits from increasing oil-directed activity in Canada, higher demand for its completion and production services, impact from new builds and upgrades, and higher drilling dayrates," he contended.
Upside: Mr. Tasdemir raised his target price by $1 to $13.25.
RioCan Real Estate Investment Trust is a "solid, large-cap" REIT that will benefit from investor appetite for yield and its robust trading liquidity, said Desjardins Securities Inc. analyst Jeff Roberts. "With continued accretive acquisitions, strong occupancy and leasing results, increased demand for space from U.S. retailers, more development projects upcoming and cheap financing, we are optimistic that RioCan will generate healthy cash flow growth over the next few years," he said.
Upside: Mr. Roberts raised his price target to $25.25 per unit from $23.50, implying a 12-month total return - including distributions - of 10 per cent.
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Oil and gas firm Rosetta Resources Inc.'s $255-million sale of its Sacramento and DJ Basin properties will lower the company's operating expenses by about 30 per cent this year, noted Canaccord Genuity analyst John Gerdes. But Rosetta would need to more aggressively develop its liquids-rich Gates Ranch Eagle Ford property before seeing significant share appreciation potential, he said.
Upside: Mr. Gerdes raised his price target by $8 to $50, but maintained a "hold" rating.
Coeur d'Alene Mines Corp. "is finally turning the corner" given its strong fourth-quarter performance, commented CIBC World Markets Inc. analyst Brian Quast. Adjusted earnings were double his estimates, mostly due to a tax benefit, and the silver-gold producer is now free cash flow positive. Capital expenditures should continue to decline in 2011 while production should see a 20 per cent bump, he noted.
Upside: Mr. Quast raised his price target by $5.50 (U.S.) to $33.
MacDonald, Dettwiler and Associates Ltd.'s fourth-quarter earnings and revenue from continuing business widely beat estimates and the advanced technology company continues to evaluate potential acquisitions, noted TD Newcrest analyst Scott Penner. Management has repeated that barring any near-term deals, the cash would be returned to shareholders, offering a potential key catalyst for the stock, he said.
Upside: Mr. Penner raised his 12-month price target by $3 to $62.
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- Precision Drilling Corp$6.40+0.25(+4.07%)
- Helmerich and Payne Inc$66.48-0.50(-0.75%)
- Nabors Industries Ltd$13.05-0.07(-0.53%)
- RioCan Real Estate Investment Trust$26.41-0.09(-0.34%)
- Coeur Mining Inc$11.17-0.14(-1.24%)
- MacDonald Dettwiler and Associates Ltd$79.55-0.20(-0.25%)
- Updated October 21 4:00 PM EDT. Delayed by at least 15 minutes.