On Thursday, RBC Capital adjusted its outlook on Advantage Energy Ltd (AAV:CN) (OTC: AAVVF (OTC:AAVVF)), increasing the stock price target to C$12.00, up from the previous C$11.00. The firm has maintained its Sector Perform rating on the company's stock. The revision follows Advantage Energy's recent acquisition of Charlie Lake assets, valued at C$450 million.
The acquisition is expected to enhance Advantage Energy's product mix and margins. It also contributes to the diversification of the company's portfolio and is anticipated to lead to significant regional synergies. The analyst from RBC Capital noted the positive aspects of the acquisition, emphasizing its potential to strengthen the company's position in the market.
Still, the deal also means increased debt for Advantage Energy, which has implications for its capital allocation strategy. Specifically, the company's share buyback program is now projected to be paused until 2026. This program has been a key point of interest for investors, and its suspension is linked to the financial strategy following the acquisition.
The analyst anticipates that the majority of the financial benefits and free cash flow related to the Charlie Lake assets will begin to have a more pronounced effect starting in 2026.
This timeline is when the company is expected to resume more aggressive capital return programs, such as share buybacks, as the debt incurred from the acquisition is managed and the assets contribute to the company's financial performance.
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