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MEG Energy (OTCPK:MEGEF) +1.8% in Tuesday's trading as RBC Capital upgraded the stock to Outperform from Hold with a C$31 price target, citing the company's strong leadership, enhanced market access via Flanagan-Seaway to the U.S. Gulf Coast, strengthening balance sheet, and long-life assets.
MEG Energy (OTCPK:MEGEF) "occupies the fairway as a pure play oil sands investment, with a bitumen production base flowing entirely from its Christina Lake in-situ SAGD project," RBC's Greg Pardy wrote. "As such, MEG would benefit from any sustained strength in oil prices."
The analyst noted MEG (OTCPK:MEGEF) achieved its net debt target of US$1.2B in Q3 2022, opening the door for 50% of its free cash flow to be allocated toward shareholder returns, with the balance earmarked for ongoing debt reduction; upon reaching its net debt floor of US$600M, 100% of free cash flow would be returned to shareholders.
Pardy said Canadian Natural Resources (CNQ) is his favorite Canadian oil producer, citing impressive shareholder returns as well as a long-life, low-decline portfolio - anchored by moderate sustaining capital - that supports superior free cash flow generative power.