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Athabasca Oil (OTCPK:ATHOF) +8.5% in Thursday’s trading as RBC Capital upgraded the stock to Outperform from Sector Perform with a C$5 price target, as the Canadian company plans to allocate 100% of free cash flow to shareholders through its stock buyback program.
“Despite ongoing volatility in commodity prices, we believe the company is in a strong financial position to weather potential near-term downside and view the recent pullback as a buying opportunity,” RBC’s Luke Davis wrote.
Athabasca’s (OTCPK:ATHOF) portfolio is resoundingly thermal-weighted, supporting decades of potential reserve life, though greenfield expansions are capital intensive, and the shale business is now focused solely on the Duvernay, which is seen as a complement to the thermal portfolio, according to Davis.
The company’s high operating leverage likely will act as a tailwind in an improving macro and commodity price environment, Davis said, believing “continued momentum on cost optimization will continue to be rewarded over time and may result in incremental fundamental investor support.”
