AltaGas: a buying opportunity?
Also: some technical analysis on Calfrac Well Services
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
Calgary’s AltaGas (TSE:ALA) made another big move yesterday, agreeing to pay US$515 million to buy Blythe Energy LLC, which owns a power plant in Southern California, major spare parts and a 108-kilometre transmission line. The company funded the deal with a combination of debt and equity, including a US$300 million credit facility and an equity offering worth $352 million. In a release announcing the deal, AltaGas chairman and CEO David Cornhill said, “The addition of natural gas-fired power generation to our energy infrastructure portfolio in the US provides another platform for growth to meet the increasing demand for clean sources of energy.”
Davis Rea CEO and portfolio manager John O’Connell, who was on BNN’s Market Call Tonight last night, likes the deal and tabbed the company as one of his top picks. “I think this presents a good opportunity to add to your position,” he said. “The management team has shown a lot of skill at building projects with inflation protection built into them, which is really unusual. They’ve done a number of acquisitions that have been accretive, they’ve financed them smartly, they have a good balance sheet and I think the dividend can grow in excess of 10 per cent for the foreseeable future. It’s not well owned or well followed by a lot of people, management has a significant stake in the company and haven’t sold any stock that I can think of, and they’re growing in the United States and other attractive markets.”
Meanwhile, in the Globe and Mail, technical analysts Monica Rizk and Ron Meisels think the charts are looking favourable for Calfrac Well Services (TSE:CFW) shares. “Calfrac Well Services declined from $38.65 to $20.22 (A-B) and then settled into a bullish technical pattern known as a “W” formation (dashed lines),” they wrote. “The rally to $28.54 (C) signaled the breakout from this pattern and the start of a new up-leg. Calfrac pulled back to support (D) and now appears ready to resume the up-trend.” Got that? Good.