Bonterra Energy (TSE:BNE) had its buy rating and $65.00 target price reiterated by Dundee Capital Markets Wednesday, after the Calgary-based oil and gas producer posted better-than-expected third quarter cash flow.
While the company beat on cash flow, its quarterly results otherwise were as expected, said Dundee analyst Geoff Ready, who also noted that this is a "good thing in today's volatile market."
Bonterra's third quarter results were highlighted by production of 13,355 barrels of oil equivalent per day (boe/d), in line with Dundee's estimate and consensus expectations.
Cash flow of $1.79 per share topped Dundee's view of $1.70, as well as consensus forecasts of $1.73 on higher liquids production, increased realized pricing and lower royalties.
Net debt of $195 million was also below Dundee's estimate of $203 million.
During the quarter, Bonterra drilled nine gross Cardium horizontal wells, all of which, plus three more from the second quarter, were brought onstream. Management has budgeted for eight gross Cardium wells to be drilled in the fourth quarter, although none of them will be completed or brought onto production until early next year.
The Dundee analyst also commented on the company ramping up water injection in a vertical well in Carnwood as a means to handle produced water flowing back from newly completed wells. The offsetting horizontal wells have so far responded positively, Ready said, and are producing above Dundee's projected type curve, though it is still too early to determine if this "pseudo-waterflood" will yield higher ultimate oil recoveries.
The brokerage noted it would monitor this closely over the coming months.
Bonterra has also converted a previously producing horizontal well into an injector, and has plans to do the same with a second horizontal well in the first quarter. Positive results from these studies would likely encourage the company to expand waterflooding activities across its Carnwood field, Ready said.
The Canadian oil and gas company has properties in Alberta, BC and Saskatchewan, and is focused on the Cardium oil play in the Greater Pembina area. Shares edged down 0.1 percent to C$50.36 in Toronto on Wednesday.