Canada-based Dundee Securities reiterated its BUY rating for Vero Energy (VRO:TSX) but reduced the company's target share price to C$7.50 from C$8.50. The junior oil and gas company's stock closed at $4.53 on August 11. Dundee attributed this deflated value to challenges in drilling and a strong reduction in cash flow. The stock's lowest value in the last 52 weeks was C$4.26, and its highest value was C$6.93.
The 2Q results that Vero released on August 11 were below Dundee's expectations. Although production increased 21 percent since the last quarter, it was 6 percent below the investment dealer's estimate. Vero's production is being hampered by delays in completing wells and Dundee expects that Q3 production will be the same or less than Q2 production, according to Dundee Securities.
At the end of Q2, Vero had utilized $132 million of its $170 million credit line. Dundee predicted that by the end of the year, the company will have a Debt to Cash Flow ratio that is more than 2x and will be close to maximizing its available credit.