Analysts at Stifel GMP are taking a wait-and-see approach to Baytex Energy (NYSE:BTE) after the company announced its planned acquisition of Ranger Oil Corp in a cash and stock deal worth C$3.4 billion.
The firm reiterated its ‘Hold’ rating and reduced its price target to C$7 from C$8.
“This purchase fashions the Company with operated position in the Eagle Ford [in Texas} that meaningfully increases the scale and scope of this core focus region for the company ahead,” analysts wrote.
Even so, analysts called the move “modestly dilutive, while taking on elevated financial risk.”
Investors will be watching to see if Baytex can establish itself as a top operator in the Eagle Ford region with Ranger Oil’s 188,900 net acres of land and 67,000-70,000 barrels of oil equivalent per day in tow.
“With the market likely to be stuck in ‘show me’ mode for the next several months, we prefer to sit on the sidelines on this name for now,” analysts said. “That said, contemplation of non-core assets sales could have us quickly changing directions on this name.”
Baytex shares traded 2.5% higher in both Toronto and New York.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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