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Whitecap Resources, a light oil energy name, is getting lots of love from the market.
The day after the company announced it is selling $56-million of non-core assets and will use the money to repay debt, the stock jumped 6 per cent.
Most people outside the energy world know very little about Whitecap, but the company's attracted the attention of those who know the sector well. The chief executive officer ran Cadence Energy, and Whitecap has quickly jumped from the junior to intermediate rank with a market value of about $1-billion.
Although the firm is still a ways off its highs from earlier in the earlier, it has steadily climbed back, and the analyst community is impressed with its growth. Plus, management is very conservative with their approach to debt.
Whitecaps's debt to cash flow for all of 2012 estimated is about 1.7 times, according to Cormark Securities, while its peer average is more than double that at 3.5 times. And its current debt should fall because the money raised from the asset sale will go toward paying back money owed.
Whitecap also announced that its credit lines have grown to $450-million from $400-million, giving the company more flexibility as it grows.
To give investors even more hope, management also announced that average production for the fourth quarter should come in around 16,700 barrels of oil equivalent a day, 70 per cent of which is oil and natural gas liquids.
Tim Kiladze