Cardinal Energy (CJ.TO) delivered solid second-quarter (ended June 30) results on Wednesday, August 13. The results included adjusted cash flow per share of $0.59, better-than-expected our expectation of $0.52 and Street consensus of $0.53. The Second quarter production averaged 6,501 BOE per day versus our forecast of 6,367 BOE per day. Netbacks remained better than anticipated primarily because of better realized prices and cut in operating costs.
Company drilled, finished and tied-in five Glauconite wells at Bantry and outcome have met or outperformed outlook up to now. The firm plans to drill 2 to 3 extra wells in H2/14. Company acquired 75 BOE per day of working interest at Chauvin and royalty production for total payment of $5.35 million.
We have included the firm’s Q2 results and additional hedging. We expect cash flow per share to be $2.33 (in 2014) and $2.66 (in 2015). We also estimate cash flow per share to be $0.56 (bit lower than $0.57 previously) in third quarter but $0.69 (increased from $0.67) in fourth quarter. Our recent anticipation calls for mean production of 6,975 BOE per day in 2014. Our estimations for the fiscal year 2014 are in-line with consensus at $0.55 (reduced from $0.59 earlier) and $0.83 in 2015 (shrunk from $0.86 previously). Company’s total payout ratio was roughly 63% for the first half including 5% production expansion over the year end production rate.
We retain our “Outperform” rating and $22.00 target price. We anticipate the firm’s shares would be well valued provided their strong financial position, lower all in payout ratio and firm’s track record. Our $22.00 target price is backed by our risked net assets value forecast of $22.05 per share.