RBC Capital Markets maintained its outperform rating on the shares of Enerflex (EFX.TO, EFXT) and its US$12.00 price target after the company terminated a contract to build a modularized cryogenic natural gas processing facility in Kurdistan.
RBC said it does not believe that the market was surprised by Enerflex's announcement that it has provided notice of cancellation.
Enerflex declared force majeure on the project in the second quarter, and the customer provided Enerflex with a notice of cancellation in the third quarter.
Enerflex will now seek to recover amounts owing on the project and will remove remaining work from its backlog, RBC said.
"We remain constructive on Enerflex shares which recently have traded higher recently as the market has increasingly recognized Enerflex's strong underlying business fundamentals," RBC said. "We do not think today's announcement will come as a surprise, and essentially amounts to legal process, but would view potential weakness as a buying opportunity."
Enerflex remains on RBC's Global Energy Best Ideas list.
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