On Tuesday, Roth/MKM maintained a Buy rating for Vaalco Energy (NYSE: NYSE:EGY) stock and increased the price target from $7.25 to $8.00. This adjustment comes in the wake of Vaalco's recent acquisition of Svenska's assets, which has positively impacted the company's production and financial forecasts.
The acquisition has contributed an additional 13 million barrels of oil equivalent (BOE) to Vaalco's proved reserves. Consequently, the firm's second-quarter 2024 sales volume estimate has been raised from 16,280 barrels of oil equivalent per day (BOE/d) to 18,717 BOE/d.
This revised guidance has led to an improved financial outlook, with the second-quarter earnings per share (EPS), cash flow per share (CFPS), and earnings before interest, taxes, depreciation, and amortization (EBITDA) projections increasing from $0.06/$0.57/$57.3 million to $0.13/$0.76/$76.8 million, respectively.
The analyst also highlighted Vaalco's robust financial position, noting that the company has no debt and holds $113 million in cash. Additionally, Vaalco is expected to generate $181 million in free cash flow during 2024. The firm's valuation appears favorable, trading at an enterprise value to EBITDA ratio of 1.9x and a price to cash flow per share ratio of 2.0x for the year 2024.
The company's third and fourth-quarter sales estimates have also been revised upwards due to anticipated increases in crude oil liftings, despite no drilling and completion activities being planned for the second half of 2024.
Lastly, the analyst pointed out the attractiveness of Vaalco's dividend, which at an annual payout of $0.25 per share, yields 4.1%. This dividend yield, combined with the company's strong financial metrics, underscores the positive outlook for Vaalco Energy's stock.
In other recent news, VAALCO Energy has started the year strong, with its Q1 2024 earnings exceeding analyst expectations. The energy company reported a net income of $7.7 million and an adjusted EBITDAX of $61.7 million, surpassing consensus estimates. Additionally, VAALCO completed the Svenska acquisition, a strategic move expected to significantly boost its production and reserves.
The company returned over $12 million to shareholders through dividends and buybacks in the first quarter, demonstrating its commitment to shareholder returns. VAALCO also achieved a safety milestone in Egypt, accumulating over 1 million man-hours without a lost time incident.
Further developments include progressing negotiations for the Venus Block P Plan of Development in Equatorial Guinea, with a FEED study underway, and planning for a 2025 drilling campaign in Gabon.
Despite challenges in securing access to drilling rigs and equipment in Egypt, VAALCO remains optimistic about its future operations. These recent developments highlight VAALCO Energy's focus on efficient operations, prudent investments, and strategic growth.
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