Proactive Investors - Baytex Energy (NYSE:TSX:BTE) and some of its Canadian exploration and production peers can see a share price boost from a fresh wave of catalysts in the field, according to analysts at Stifel Nicolaus.
Canadian rig activity is up 10% year-on-year and up 40% compared to this time in 2021 and, as such, the broker is expecting to see an array of operational stimulus highlighted in upcoming quarterly results.
“We expect drilling and growth-related catalysts could be prevalent in year-end updates,” Stifel analyst Cody Kwong said in a note.
“Clearwater steps-out/exploration news could be meaningful for players such as Baytex, Headwater Exploration Inc (TSX:HWX)(TSE:HWX), Obsidian Energy Ltd (TSX:OBE)(TSX:OBE, NYSE:OBE), Rubellite Energy Inc (TSX:RBY) (TSE:RBY), and Tamarack Valley Energy Ltd . (TSX:TVE) while on the international front, we expect to see exploration news from Parex Resources Inc . (TSX:PXT).”
Elsewhere in the sector, the investor focus will be more sharply fixed on dividends, and whether they’ll be sustained now that energy prices are coming off recent 2022 highs.
Specifically, Kwong reckons there could be some nervousness surrounding Birchcliff Energy Ltd . (TSX:BIR). (TSX:BIR), Gear Energy (TSX:GXE) (TSX:GXE), and Pine Cliff Energy Ltd (TSX:PNE) (TSX-V:PNE).
Whilst the analyst notes that Canadian Natural Resources Limited (TSX:TSX:CNQ), Parex Resources Inc (TSX:PXT), Surge Energy Inc . (TSX:SGY)(TSX:SGY), Whitecap Resources Inc . (TSX:TSX:WCP), and Vermilion Energy Inc (TSX:TSX:VET) have already announced or are expected to increase shareholder payouts in 2023.
“We believe a meaningful AND sustainable dividend will continue to be differentiated, particularly in a volatile market where the tangibility of cash can help bridge the return gap till the next commodity price upswing," Kwong said.
“We believe we are beginning to see the emergence of a valuation premium for these very entities.
“The base plus special dividend framework is also emerging as an eloquent way to navigate turbulent commodity cycles, with a conservative base dividend easily defended at low prices, while juicy special dividend upside can still be had at high commodity prices ( Tourmaline Oil Corp (TSX:TOU) and Crescent Point Energy Corp (TSX:CPG) are prime examples of this).”