An Investor’s Digest survey of securities analysts’ opinions on more than 1,000 Canadian companies found these two resource stocks in the “Top 10” list of “Time to Buy”.
Endeavour Mining Corp. (TSX—EDV)
Gold mining stock Endeavour reported its fourth-quarter 2020 financial results, while announcing the initiation of a normal course issuer bid, enabling buybacks of up to 12.2 million shares.
The company has four gold mining operations in West Africa in addition to having project development and exploration assets. Its operations are held in Burkina Faso (Karma, Hounde, Mana and Boungou mines), Côte d’Ivoire (Ity mines) and Mali (Kalana Project). The company generates maximum revenue from Burkina Faso.
The company delivered cash flow per share of US$1.47, less than PI Financial analyst Justin Stevens’ estimate of US$1.91 and the consensus forecast of US$1.95, though Mr. Stevens notes that if adjusted for taxes on an additional dividend declared at Agbaou gold mine in Côte d’Ivoire, cash flow per share was US$1.91. Adjusted earnings per share of US$1 was in line with the analyst’s estimate of US$1.03 and above consensus of US$0.90. Endeavour ended the quarter with US$715 million in cash and US$640 million in long-term debt, adding up to a net cash position of US$75 million.
Overall reserves increased to 18 million ounces at year-end 2020, up 128 per cent from 7.9 million ounces at year-end 2019 due to the addition of the Teranga and Semafo assets, as well as additions at Houndé and a maiden reserve at Fétékro. Reserve calculation prices for 2020 used US$1,300 per ounce at all assets except the Mana open pit. Overall measured and indicated resources increased to 28.4 at year-end 2020, up 93 per cent from 14.7 at year-end 2019 with increases from the new assets more than offsetting decreases at other African mines in Kalana, Karma and Ity.
“While fourth-quarter results were somewhat noisy, relating to the transition of Agbaou to held-for-sale, we see Endeavour as delivering on its expectations, and achieving its pro forma 2020 guidance for both production and costs. We note consolidated all-in sustaining costs of US$803 per ounce for the quarter continues to represent a strong operating margin, which is expected to improve as the low-cost Sabodala-Massawa mine joins the roster,” says Mr. Stevens.
The analyst leaves his “buy” recommendation and $50 target share price unchanged. All eight of the analysts covering Endeavour Mining recommend it as a “buy” placing it in a four-way tie for the No. 1 spot on our top-10 “Time to Buy” list.
Birchcliff Energy Ltd. (TSX—BIR)
On Feb. 10, after market close, oil and gas stock Birchcliff Energy Ltd. released its audited 2020 financial results, after having previously released unaudited financials and 2020 reserves on the same day.
Birchcliff’s fiscal 2020 audited financial results were directly in-line with the unaudited release on Feb. 10. As such, both the audited fourth-quarter 2020 production of 78.6 million barrels of oil equivalent per day and audited fourth-quarter cash flow of $66.5 million were directly in-line the unaudited results.
Sticking with a similar trend, fourth-quarter 2020 audited capital expenditures of $41.3 million were directly in-line with the unaudited release as well. In the fourth quarter the company sold a non-core asset for around $12.5 million. Fourth-quarter activity included the drilling of six net wells, in part to help the execution of the 2021 capital program.
In 2021, the company has guided for a capital program of roughly $210 million to $230 million, which is 73 per cent weighted towards drilling, completions and tie in activities with Birchcliff expecting to drill 27 net wells and bring 33 net wells on production. The company currently has two drilling rigs running at Pouce Coupe, BC gas plant in the Montney region with one of the rigs drilling the last well of a 10-well pad, and the second rig drilling an eight-well pad which is offsetting the recently activated and encouraging seven-well 04-04 pad.
Birchcliff’s 2020 proved developed producing (PDP) reserve volumes remained approximately flat year-over-year, while the quality of the company’s reserve volumes improved as PDP natural gas liquids, which include condensate volumes, increased 14 per cent year-over-year. At the 1P (proven) and 2P (probable) levels, Birchcliff’s reserves decreased one per cent and increased one per cent year-over-year, respectively.
“We calculate a PDP finding, development and acquisition cost of $10.02 per barrel of oil, providing Birchcliff with a 2020 PDP recycle ratio of 0.8 times, which improves to 1.4 times when excluding the company’s significant infrastructure and land spending seen in 2020. We see tailwinds for Birchcliff’s future recycle ratios as facility spending begins to roll off,” say ATB Capital Markets analysts Patrick O’Rourke and Kyle Styner.
Messrs. O’Rourke and Styner maintain their “outperform” recommendation and $4 target share price. Seven of the nine analysts covering Birchcliff Energy recommend it as a “buy”, good for fifth place on our top-10 “Time to Buy” list.
This is an edited version of an article that was originally published for subscribers in the April 23, 2021, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
Investor’s Digest of Canada, MPL Communications Inc.
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