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On Monday, International Petroleum Corp (TSX:IPCO:CN) (OTC: IPCFF) received an upgrade in stock rating from Jefferies, moving from Hold to Buy. The firm also increased the price target for the company's shares to SEK140.00, up from the previous SEK130.00. The upgrade reflects Jefferies' positive view on the company's Blackrod development and its operational track record.
Jefferies analysts noted that while International Petroleum's financial estimates remain largely unchanged, the net asset value (NAV) valuation benefits from the roll-forward due to the Blackrod development.
The company is expected to see lower capital expenditures in 2025 compared to the previous year, but the investment in growth is anticipated to result in another year of negative free cash flow. Despite this, the analysts see value creation from the Blackrod investment, which could lead to additional development phases.
The company's share repurchase program under the Normal Course Issuer Bid (NCIB) is expected to continue with an estimated $93 million in buybacks. However, this could push leverage above 1.5 times, a threshold that previously prompted the company to pause buybacks when leverage was below 1.0 times.
Nevertheless, Jefferies sees the potential for the company to create clear value through its investment in Blackrod, coupled with a strong operational delivery record.
Jefferies has rolled forward their NAV calculations to January 1, 2026, and adjusted the net debt to year-end 2025, resulting in an increase in NAV by 16% to SEK 214. The expected net debt by the end of 2025 is projected to be $374 million, up from the previous year-end 2024 net debt estimate of $237 million.
Despite the increase in net debt, the firm maintains an unchanged enterprise value to EBITDA (EV/EBITDA) multiple of 4.5 times, which results in a 16% decrease in EV/EBITDA to SEK 65. Additionally, Jefferies has slightly raised the percentage chance of success for the Blackrod Phase 2 and 3 developments.
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