Crew Energy Inc (TSX:CR)’s fourth-quarter production beat expectations, owing to performance from its newer wells at Groundbirch and Septimus, according to broker Stifel GMP.
Combined with exploration and development capex for 2022 which was 2% lower than the guidance C$7.50 midpoint, Crew’s year-end net debt of $150 million was $15 million below its forecast.
Still, Stifel analysts are reducing their price target for the company’s stock to $7.50 from $8 due to the shift in the natural gas futures curve since it re-launched coverage on January 12, 2023.
“We continue to believe Crew’s portfolio offers attractive resource for LNG supply, while performance of its base business continues to look strong,” the analysts wrote.
READ: Lithium demand is increasing, Stifel analysts say, so look to companies developing projects in 2023 and beyond
Crew’s production for the three months to December 31, 2022, was ahead of guidance averaging 32.9 thousand barrels of oil equivalent per day (mboe/d) versus guidance for 30-32 mboe/d.
The analysts noted that Crew cited strong well performance from the five Groundbirch wells at 4-17 that came online in the fall, the 4-14 Septimus wells, and early results from the 11-27 Septimus wells.
“With the recent framework agreement between the Blueberry River First Nations and the BC (British Columbia) government, we expect to see some progress through the year on Crew’s permitting applications (93 wells, the Groundbirch plant, other infrastructure),” the analysts said. “In the meantime Crew still has 47 Tier One well permits in hand.”
Outlining their thesis for Crew, the analysts noted that the company holds an outsized swath of Montney lands in northeast British Columbia proximal to the Coastal Gaslink LNG Canada pipeline, and has outlined a flexible plan to double production to over 60,000 boe/d of low-emission natural gas coincident with the start-up of LNG Canada’s Phase 1 project in 2026e.
“1H23 may be relatively devoid of catalysts for CR, given low planned investment levels,” they wrote. "Even so, we see the risk/reward of the shares as being favorable at these levels, and like the strategy CR has laid out.”
Contact the author at stephen.gunnion@proactiveinvestors.com