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Nexen platforms in the North Sea
Nexen platforms in the North Sea

Eye on Equities

New operating woes prompt TD to cut Nexen price target Add to ...

Nexen Inc. had bad news to report on two fronts Monday: a production halt at its Yemen operations because of a labour disruption, and curtailed output at its Buzzard assets in the North Sea as repairs to a platform cooling system take longer than expected.

"Both setbacks are disappointing," commented TD Newcrest analyst Menno Hulshof.

He noted that Nexen had indicated in its earlier first-quarter results that repairs to the cooling system were nearly complete. But now the latest estimate appears to be some time this summer. Meanwhile, in Yemen, Nexen previously suggested that production was unaffected by the labour dispute.

Mr. Hulshof cut his 2011 production estimates for the company to 227,900 barrels of oil equivalent per day from 236,000. That's below the company's last published guidance range of 230,000 to 270,000 barrels per day. The company did not give an updated estimate on how the latest production woes will affect production, but a spokesman for Nexen told Reuters Monday that output from the Buzzard field is likely to be about half the normal rate of around 200,000 barrels per day for a few months while repairs are completed.

Downside: Mr. Hulshof cut his price target by $1 to $26. Meanwhile, he maintained a "hold" rating, given "uncertainties on a number of different fronts, including the production ramp-up at Long Lake (oil sands operations in Alberta), the timing of resumption of drilling in the Gulf of Mexico, the potential impact of the proposed Nigerian Petroleum Industry bill and lastly, strike activity in Yemen."

Coeur d'Alene Mines Corp. reported disappointing first-quarter earnings as silver production was lower than expected and cash costs rose. The company reaffirmed its 2011 production guidance of 20 million ounces of silver, but CIBC World Markets Inc. analyst Brian Quast doubts it will meet that target. He lowered his 2011 earnings per share estimate by 15 per cent.

Downside: Mr. Quast cut his price target by $4 (U.S.) to $38.

Ensign Energy Services Inc. reported strong first-quarter results thanks to U.S. operations that are humming and higher operating margins. "While Ensign continues to emphasize a number of challenges and risks, we believe the outlook is robust," said CIBC World Markets Inc. analyst Jeff Fetterly. "Given Ensign's strong leverage to North American activity levels and broad geographic exposure, we expect to see a continue acceleration of financial performance in coming quarters."

Upside: Mr. Fetterly raised his price target by $1 to $22.

Silver Wheaton Corp. reported quarterly operating and financial results below consensus and while management remains confident the company can meet its annual forecast of 27 million to 28 million ounces, TD Newcrest analyst Daniel Earle isn't so sure. He also believes there is "heightened potential" for silver prices to underperform in the near term on continued weakness in speculative investment flows.

Downside: Mr. Earle slashed his price target by $10 (U.S.) to $44.

Foraco International SA "blew away" the forecasts of Beacon Securities Ltd. analyst Michael Mills as it reported a 166 per cent jump in first-quarter revenues. "Foraco shares continue to languish due to the lack of liquidity in the name and lower investor visibility," commented Mr. Mills. "However, FAR is now believed to be the fourth-largest mineral driller by rig count, with operations around the world. This platform should deliver significant profitability over this drilling cycle."

Upside: Mr. Mills hiked his 12-month price target by $1.25 to $4.50.


Follow Darcy Keith on Twitter for more of the latest analyst actions from the Street and exclusive investing news from The Globe and Mail.

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