Citigroup Upgrades Teekay Offshore to Buy (TOO)

Citigroup is out with a research report this morning, where it upgrades shares of Teekay Offshore Partners LP (NYSE: TOO) to Buy, from Hold; it has a $26.00 price target on the stock, up from $15.00.

The Citi analysts cited the partnership’s improved operating performance and a number of prospects that they believe could drive continued distribution growth.

The analysts noted that TOO’s recent equity offering has weighed on its unit price which they believe is opportunity to enter into the shares at an attractive entry point especially taking into consideration TOO’s current yield of 8.9%.

As for valuation, the analysts remarked, “Our higher price target is driven by our view that TOO should be able to raise distributions to an annualized rate of $2.10/unit ($1.80 previously) over the next 12 months and that the units should trade with an 8.0% yield, only 90 basis points lower from current levels.”