Ithaca Energy Inc. spent three months talking to prospective buyers of the company, a process that kept its shares above $3 much of the time. It then decided in late May that it couldn't close a deal "that properly reflect[ed] the value of the company."
Shareholders quickly decided that news reflected poorly on the value of the company, making its shares the biggest losers on the TSX that day. There's been no meaningful recovery since, as Ithaca Energy now trades around $1.70 per share.
We don't know what kind of offers Ithaca Energy scorned, but we do know what several analysts who follow the company suggest it's worth — and that would be quite a bit more than current levels.
Stephane Foucaud of FirstEnergy Capital believed an acquirer that was able to use Ithaca Energy's tax losses to offset its own profits would value it at £1.93, or about $3 (Canadian). (Ithaca Energy has its headquarters in the U.K., with Canadian offices in Calgary.)
Mr. Foucaud, who had warned of the downside if a potential deal collapsed, has a target price of £1.55, or just under $2.50 (Canadian) and an "outperform" rating. That would be a gain of nearly 50 per cent.
Others are even more bullish.
Vic Vallance of Fraser Mackenzie has a $3.70 (Canadian) target price, more than twice current levels. Mr. Vallance believes Ithaca Energy, which operates several oil fields in the North Sea off the British coast, will deliver more cash flow per share as it executes on its plans.
James Hosie of RBC Dominion Securities also has a $3.70 target price. "Ithaca remains a fully funded North Sea development play with the potential to make material asset acquisitions, potentially adding to an already attractive production growth profile that is targeting over 20,000 barrels per day in 2014, up from 4,300 barrels per day in Q1/12."
Bill Newman of Mackie Research has a $3.25 target, calling the recent fall "a buying opportunity."
Ian Macqueen of CIBC World Markets Inc., who was restricted from covering the shares because CIBC was Ithaca Energy's financial advisor, has a $2.75 target price. "We see upside to the current share price, but given current market conditions we think that positive operational momentum is a requirement for share price appreciation."
David Milstead