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Coverage Initiated on 'Almost Famous' Energy Firm with Thermal Oil, Natural Gas Assets
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The reasons why this stock is attractive now are presented in a CIBC report.

In an April 16 research note, analyst Trevor Bolland reported that CIBC initiated coverage on Athabasca Oil Corp. (ATH:TSX; ATI:FSE) following its "major transformation over the past several years, which has substantially changed the outlook for the stock and gives rise to our constructive view."

CIBC assigned to the corporation an Outperformer rating and a CA$1.35 per share target price that compares to CA$1.05, the current trading price. This discounted valuation, Bolland noted, makes it an advantageous time for investors to get into or build their position in the stock.

The analyst named three important factors that underlie CIBC's positive thesis on Athabasca Oil.

One, the company is "uniquely positioned" among small and mid-cap exploration and production companies, Bolland described. This is due to its self-funded asset base, its thermal business with low declines and a modest sustaining cost and its high-quality, liquids-rich natural gas business that generates "peer-leading netbacks."

Two, Athabasca Oil's long-term sustainability is significantly improved after the company's recent work to reduce its cost structure.

Three, the energy company has both short- and long-cycle growth assets, the combination of which affords "marked forward optionality," Bolland noted.

Four, Athabasca Oil is now, for the first time, generating free cash flow. "Combined with an influx of cash from its recent midstream monetization," explained Bolland, "it is in the enviable position of having excess cash to allocate to growth, share buybacks and/or debt reduction."

Bolland concluded, "The company is deserving of a more in line multiple as the Street begins to recognize and properly value these enduring qualities" of its two business segments."


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Disclosures from CIBC, Athabasca Oil Corp., April 16, 2019

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers.
Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Innergex Renewable Energy Inc.

CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Athabasca Oil Corporation in the next 3 months.

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