©Reuters.
On Tuesday, JPMorgan updated its stance on Meg Energy (MEG:CN) (OTC:MEGEF(OTC:)), raising its price target on the stock from CA$33 to CA$34, while rating the stock 'Neutral'. ” was maintained. The revisions follow a strong week for Meg Energy on the back of a solid fourth-quarter report and announcement of a CEO succession plan.
Meg Energy ended the year with strong business, achieving expected production levels of 110,000 barrels per day. The company also managed to reduce its net debt to USD 730 million from USD 885 million in the third quarter. This progress puts the company on track to reach the lower end of its expected net debt of $600 million by the third quarter of 2024, assuming a West Texas Intermediate (WTI) price of $75 per barrel.
The company's outlook for 2024 is expected to be a year of minimal maintenance requirements and reduced operational risk. Additionally, the commencement of the Trans Mountain Expansion (TMX) project is expected to strengthen the Western Canada Select (WCS) differential and provide additional flexibility for Meg Energy in the second half of the year.
Despite these operating tailwinds, the company has significantly increased its capital expenditures for growth, going from essentially zero in 2023 to approximately CAD 100 million in 2024 and approximately CAD 100 million in 2025. He pointed out that the amount would reach CAD 190 million. This increase in spending is likely to impact free cash flow and free cash flow, resulting in share buyback levels reaching 100%.
Recognizing the capable management of Meg Energy's only asset and the potential benefits of highly attractive growth projects that can be added at C$20,000 per flowing barrel, JPMorgan's analysis indicates that the company's stock is in the same category as its peers. This suggests that the company is fairly evaluated compared to other companies. The report concludes by acknowledging Meg Energy's early stage investment cycle and reaffirming its neutral position based on the latest financial model.
This article was generated with the help of AI and reviewed by an editor. Please see our Terms of Use for more information.
