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TransAlta Corporation BUY Target $ 18

TransAlta

TransAlta (Photo credit: Xenoc)

TA : TSX : C$13.62
TAC : NYSE
BUY 
Target: C$18.00

COMPANY DESCRIPTION:

TransAlta is focused on generating electricity in Canada,the US and Australia through its portfolio of plants fuelled by coal, gas, hydro, wind and geothermal resources. The company owns and operates 8,245 MW of net electricity generation. The company also derives revenue from the
wholesale trading of electricity and other energy related commodities and derivatives.

All amounts in C$ unless otherwise noted.

Investment recommendation


TransAlta has entered into a power purchase contract for 86 MW of capacity from its Imperial Valley geothermal facilities in California with the City of Riverside. The facilities are operated under a 50/50 joint venture with MidAmerican Energy, and currently power from eight of the 10 facilities is sold under a long-term contract to Southern California Edison. The PPA has a term of 24 years beginning in 2016 and represents about 25% of the total capacity of the Imperial Valley facilities. Although still a couple of years away from coming into effect, the new contract is a positive development as it provides the JV with enhanced and more stable pricing for power from the contracted geothermal facilities which otherwise receive a variable power price based on a function of natural gas prices (the SRAC price). In addition, the new contract sets a precedent on which additional contracting for other geothermal units can be based as contracts roll off. We view this announcement as positive to the stability of longer term cash flow. We are making no changes to our BUY rating and C$18.00 target price.
Valuation
Our 12-month target price is primarily based on a discounted cash flow analysis, dividend discount model, and earnings and cash flow multiples
relative to both historical valuations and power and pipeline peers. Note  that our valuation assumes that the current level of the dividend is maintained. While we have an C$18.00 target price, we see the value of the stock in excess of that level on a discounted cash flow analysis; however, until the company wins back investor confidence and convinces the market that the dividend level is safe, the stock is unlikely to reach its intrinsic value. Should the shares continue to languish at current low levels, we believe there is an increased potential that TransAlta becomes an acquisition target.

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by jackbassteam on June 19, 2013  •  Permalink
Posted in Electrical Generation, Energy
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Posted by jackbassteam on June 19, 2013

http://amp2012.com/2013/06/19/transalta-corporation-buy-target-18/

Raging River Exploration Inc.

RRX : TSX : C$3.85
BUY 
Target: C$5.50

Initiating coverage of RRX and WCP
Two Saskatchewan Viking oil focused operators with proven management teams
With this publication, we are initiating coverage of Raging River Exploration (RRX: TSX) with a BUY rating and C$5.50 target and Whitecap Resources (WCP: TSX) with a BUY rating and C$13.00 target price. Both companies are led by experienced management teams with a history of successfully creating shareholder value.

Raging River Exploration RRX BUY $3.85 $5.50 
Whitecap Resources WCP BUY $ 1 0.20 $13.00 
We believe these stocks offer superior share price appreciation potential owing to:
1. Strategic positions in one of the largest light oil plays in the Basin. Both Raging River and Whitecap offer investors significant exposure to the Saskatchewan Viking light oil play in the greater Dodsland area that contains an estimated six billion barrels of original oil in place. Technology and improved operational efficiencies have increased already robust well economics across the play, which continues to expand in the halo areas with additional step out drilling efforts.
2. Organic sustainability that is rewarded by the market. RRX has reached critical mass and has grown its asset base into a free cash flow generating model. WCP maintains one of the lowest total payout ratios in the high yield E&P group at a 96%/94% forecast in 2013/2014. WCP in our view is well positioned to raise its dividend in 2014 by up to 20%, while maintaining a <100% payout ratio.
3. Utilizing a cost of capital advantage in a buyer’s market drives stock performance. Both RRX and WCP maintain strong balance sheets, a cost of capital advantage, and proven ability to extract additional value from acquisitions which position each well within the current market environment.

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by jackbassteam on June 18, 2013  •  Permalink
Posted in Energy, Oil
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Posted by jackbassteam on June 18, 2013

http://amp2012.com/2013/06/18/raging-river-exploration-inc/

Anadarko Petroleum BUY Target $127

Anadarko Tower reflected in Lake Robbins

Anadarko Tower reflected in Lake Robbins (Photo credit: Joel Olives)

APC : NYSE : US$87.47
BUY 
Target: US$127.00

COMPANY DESCRIPTION:
Anadarko Petroleum is an exploration and production company with global operations in countries including the United States, Algeria, Brazil, Ghana and Mozambique

OUTPERFORMANCE
Investment thesis
Our Q2/13 production expectation of ~70 Mmboe is above company guidance (67-69 Mmboe), as is our ’13 production expectation of ~290 Mmboe (279-287 Mmboe). The calibration of capital and production imply Anadarko’s capital productivity is ~20% superior to industry (liquids-normalized). Before contingent value related to further deepwater GOM exploration success and Mozambique LNG, we believe APC offers ~20% differential upside relative to the group.
Upside to our target includes deepwater Gulf of Mexico exploration/ appraisal success beyond sanctioned projects and the evolution of a Mozambique LNG development scheme. Preliminary analysis suggests a 10-train Mozambique LNG development commencing late this decade and sequenced as one train per year over ten years would increase our target price $5-$10/share assuming a FOB LNG price of ~$8/Mmbtu.
Superior E&P capital yield (cash-on cash return)
Anadarko’s unleveraged cash margin is modestly above the sector due to product mix, while capital productivity is ~20% superior to industry. The company’s capital productivity benefits from asset portfolio quality (Wattenberg, Eagle Ford, Marcellus), operating scale (buyer power) and the learning curve advantage of operating scale. Thus Anadarko’s capital yield, principally due to differential capital productivity, is over 150%, whereas the industry median capital yield is ~120%.
US onshore growth drivers
The assets underpinning the company’s first quarter US onshore sequential production growth included Wattenberg (+23%, ~21 Boepd), Marcellus (+9%, ~7 Boepd), Eagle Ford (+9%, ~3 Boepd) and East Texas (+5%, ~3 Boepd).

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by jackbassteam on June 4, 2013  •  Permalink
Posted in Energy, Oil
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Posted by jackbassteam on June 4, 2013

http://amp2012.com/2013/06/04/anadarko-petroleum-buy-target-127/

Airline Stocks Headed Higher

George Leong, B.Comm. for Profit Confidential

The improved global economy has helped to drive up the spending habits of consumers, and an area that has really benefited from the income creation is the travel sector.

Airlines around the world have reaped the benefits from the improved travel sector.

The airline sector is estimated to earn $10.4 billion in profits this year, up from the previous estimate of $8.4 billion, according to the International Air Transport Association (IATA). (Source: “Small Boost to Airline Profitability – Industry Profit Margin Improves to 1.6%,” International Air Transit Association web site, March 20, 2013.)

According to the IATA report, the top market in the airline sector is predicted to be the Asian-Pacific airlines, with estimates calling for $4.2 billion in net profits this year, up from $3.9 billion in 2012 and accounting for a 40.4% share of the total global airline sector.

The North American airline sector is also looking good, with profits estimated at $3.6 billion this year, well ahead of the $2.3 billion recorded in 2012.

Coming in third is expected to be the Middle Eastern airline sector, with $1.4 billion in profits, more than 50% higher than the $900 million in 2012.

The airline sector has been improving since the end of the recession. Lower fuel costs and increased bookings and travelling have helped to drive up the sector.

Take a look at the Dow Jones US Airlines Index  Notice the beautiful uptrend since November 2012 in correlation with the S&P 500 In the low-cost discount side, a carrier that I frequently fly with and like is JetBlue Airways Corporation (NASDAQ/JBLU). I have followed the stock for over a decade and continue to feel the company has what it takes to be a major player in the discount airline sector.

First formed in 1998, JetBlue Airways is a discount air carrier serving markets in the United States, Puerto Rico, and Mexico; along with 10 countries in the Caribbean and Latin America region. JetBlue offers services to 77 cities via 800 daily flights.

In April, the airline’s key revenue passenger miles reading came in at 11.5 million for an 83.8% load factor, up 6.8% year-over-year. (Source: JetBlue Airways Corporation, last accessed May 16, 2013.)

Following a decline in revenues from 2008 to 2009, JetBlue came back with growth in 2010 to 2012 and Thomson Financial estimates call for the growth to continue in 2013 and 2014.

For more of a global airline sector play, United Continental Holdings, Inc. (NYSE/UAL) is worth a look. The company formed from the merger of Continental Airlines and United Airlines in 2010.

United Continental offers around 5,446 flights daily to 370 airports on six continents.

Revenues are predicted to rise three percent to $38.3 billion this year, followed by $39.7 billion in 2014, up 3.9% year-over-year.

 

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by jackbassteam on May 20, 2013  •  Permalink
Posted in Aircraft, Economic Recovery, Energy
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Posted by jackbassteam on May 20, 2013

http://amp2012.com/2013/05/20/airline-stocks-headed-higher/

Twin Butte Energy Ltd.

Official seal of Lloydminster

Official seal of Lloydminster (Photo credit: Wikipedia)

TBE : TSX : C$2.12
BUY 
Target: C$3.20

COMPANY DESCRIPTION:
Twin Butte Energy Ltd. is an intermediate producer focused on heavy oil development along the Lloydminster fairway of Alberta and Saskatchewan. The company adopted a yield plus modest growth strategy upon closing its acquisition of Emerge Oil & Gas in early 2012.

Investment recommendation
Twin Butte released first quarter results largely in line with its guidance and CG/consensus estimates. Despite headwinds from wide heavy oil differentials, strong condensate prices that factor in its blending costs, adverse weather, and isolated production challenges at Primate, Twin Butte maintained a payout ratio below 100% with average production down only 1.6% QoQ. We have maintained our BUY rating on the stock and target price of C$3.20, based on a 1.0x multiple to NAV and reflecting a 2013 EV/DACF multiple of 6.8 times.
Investment highlights
Q1 in line, no surprises. Production averaged 17,254 boe/d, in line with our estimate of 17,326 boe/d and consensus of 17,190 boe/d. CFPS of $0.13 was also in line with our $0.13 and consensus of $0.12.
Prudently scaled back CAPEX in January but narrowing differentials could enable re-acceleration in H2/13. Capital spending was previously scaled to $85 million (from $110 million) given isolated issues at Primate and widening heavy oil differentials. Given an improved differential outlook, we see potential for a H2/13 CAPEX increase of $5 to $10 million.
Payout ratio remains best in class; current dividend is solid. Twin Butte maintains one of the lowest total payout ratios amongst the high yield Intermediate E&P group with a total payout ratio pre/post DRIP of 100/95% on our 2013 estimates.
Valuation
Twin Butte trades at a 0.7x multiple to CNAV, a 5.2x EV/DACF multiple and $41,800 per BOEPD based on our 2013 estimates, compared to peer group averages of 0.7x CNAV, 7.8x EV/DACF and $64,400/BOEPD.

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by jackbassteam on May 16, 2013  •  Permalink
Posted in Energy, Intermediate
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Posted by jackbassteam on May 16, 2013

http://amp2012.com/2013/05/16/twin-butte-energy-ltd-2/

EOG Resources

TITLE: Sod house. McKenzie County, North Dakota

TITLE: Sod house. McKenzie County, North Dakota (Photo credit: Wikipedia)

EOG : NYSE : US$135.69
BUY 
Target: US$194.00

EAGLE FORD DRIVES FURTHER GAINS IN CAPITAL PRODUCTIVITY
Investment thesis
We increased our target price $18 to $194 per share due to ~10% increase in capital productivity (underpinned by the Eagle Ford) and a
higher oil price realization. The Eagle Ford comprises almost 50% of EOG’s capital outlays this year. Simply put, EOG’s Eagle Ford leasehold
generates the highest returns of any large-scale NAM resource play.
Our liquids growth outlook of ~28% is toward the high end of guidance (16%-30%). The calibration of capital and production imply EOG’s
capital productivity is ~15% superior to industry (liquids-normalized).
Investment highlights
 Further improvement in Eagle Ford well performance: In the latest quarter, ~20 select wells in Gonzales/Karnes Counties (“east area”)
commenced production at over 4,000 Boepd (~90% liquids) suggesting recoveries of 2,000+ Mboe. Year-to-date, Eagle Ford wells have commenced production at ~1,200 Bopd the first 30 days, suggesting a recovery of ~850 Mbo for a cost of ~$6 million per well.
This represents a ~30% improvement in well performance versus last year. Wells in the “east area” average ~1,600 Boepd the first 30 days, suggesting recoveries of 1,000-1,100 Mboe and wells in the “west area” average ~800 Boepd the first 30 days, suggesting recoveries of 500-600 Mboe.
 Strong initial Three Forks Second Bench test, continued robust 160- acre down spaced results in core Parshall field: Recent infill Bakken
tests in the Parshall field on 160-acre spacing have commenced production at an average 30-day rate of ~2,000 Bopd, suggesting recoveries of ~1,000 Mbo per well. In the Antelope area, southwest of the Parshall field in McKenzie County, a Three Forks Second Bench test commenced at 3,150 Bopd.

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by jackbassteam on May 9, 2013  •  Permalink
Posted in Eagle Ford, Energy, Fracking
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Posted by jackbassteam on May 9, 2013

http://amp2012.com/2013/05/09/eog-resources/

EnerNOC

Image representing EnerNoc as depicted in Crun...

Image via CrunchBase

ENOC : NASDAQ : US$17.68
BUY 
Target: US$20.00

COMPANY DESCRIPTION:
EnerNOC is a leading developer of clean and intelligent power solutions designed for commercial, industrial and institutional end users of electricity. The company’s proprietary demand response technology platform remotely monitors and reduces peak load demand across its diverse installed base.

Investment recommendation


With good cash flow, a healthy balance sheet, and growth initiatives aggressively moving ahead (water, international, big data), we maintain
our BUY rating into the important ‘16/’17 PJM auction (open May 13).
Investment highlights
 As expected, EnerNOC delivered a solid report in the seasonally slower Q1 period. Gross margins (+830bps y/y) and new application
and service offerings continue to impress, while 2013 stays on track with positive market developments (expected PJM reserve margin
shortfalls) and key new “tech” hires in place.
 Guidance for ’13 is reiterated (revs $360-400M, adjusted EBITDA $62-77M), while international markets continue to progress nicely
(Australia/New Zealand/UK/Japan), and domestic opportunities (TX, irrigation, etc.) look to offer potential upside in ~’14.
 Our 2013 GAAP estimates adjust to $391M/$0.60 from $380M/ $0.72, while 2014 estimates go to $485M/$1.07 from $475M/$1.02.
Pro forma EPS estimates for ‘13/14 are $1.46 and $2.00, respectively (from $1.44 and $1.75).
Valuation
Our $20 target is based on a 4.7x EV/adjusted EBITDA multiple on our 2014 adjusted EBITDA estimate of ~$90.9M (from 83.0M).
Risks
Regulated end-markets, increased competition within the DR and EE markets and share price volatility.

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by jackbassteam on May 8, 2013  •  Permalink
Posted in Energy, Infrastructure
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Posted by jackbassteam on May 8, 2013

http://amp2012.com/2013/05/08/enernoc/

Renewable Energy Group

Image representing Renewable Energy Group as d...

Image via CrunchBase

REGI : NASDAQ : US$9.91
BUY 
Target: US$12.00

COMPANY DESCRIPTION:
Renewable Energy Group is the largest producer of biodiesel in the United States. As a fully integrated producer, Renewable Energy‘s capabilities include feedstock acquisition, facility construction management, facility operations and biodiesel marketing.

Investment recommendation


While we expect shares to remain volatile given the commodity-driven economics, we stay constructive as trends remain very favorable for RIN
prices thus far in ‘13. Maintain BUY, raise target to $12.
Investment highlights
 REGI reported Q1/13 results above guidance (adjusted EBITDA of ~$5- 15M), reporting revs/adjusted EBITDA of $211.4M/$22M (on 38.9M
gallons) vs. our $201.0M/$14.7M estimates (normalized for reinstatement of blender’s credit, revenue ~$339.3M w/ credit).
 Management execution stays strong, as “blender’s bounty” gets recognized (following careful contract negotiations) and capacity/distribution continue to increase. The balance sheet also stays strong, even with strategic inventory build of higher cloud point product ahead of warmer months.
 RVO and favorable RIN pricing drive a strong outlook, with Q2 adjusted EBITDA expected at ~$35-50M (~55-65M gallons) and Q3 at ~$25-40M
(~55-70M gallons).
 Our ‘13 rev/adjusted EBITDA estimates go to $1.28B/$130M from $1.1B/$101.9M, while’14E goes to $1.18B/112M from $1.07B/$70.6M.
Valuation
We derive our $12 target (from $9.00) by applying a 4.0x EV/EBITDA multiple to our ’14 adjusted EBITDA estimate of $111.6M.
Risks
Commodity price movements, future financing needs, project execution.

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by jackbassteam on May 3, 2013  •  Permalink
Posted in Alternate Fuels, Energy
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Posted by jackbassteam on May 3, 2013

http://amp2012.com/2013/05/03/renewable-energy-group/

Range Resources Corporation

RRC : NYSE : US$74.00
HOLD 
Target: US$72.00

2H13 ETHANE PRODUCTION RAMP – A MINOR VALUE DEDUCT

COMPANY DESCRIPTION:
Range Resources is an exploration and production company with assets in the Anadarko, Appalachian, Permian and Williston Basins.
Investment thesis
We our lowering our target price $5 to $72 per share due to a ~5% higher capital allocation toward gas (~$3/share) and the second half ‘13 commencement of Marcellus ethane production (~$2/share).
Specifically, the company anticipates producing ~5 Mbpd of ethane via transport to Sarnia, Ontario in the 2H13 and ~15 Mbpd of ethane in early ’14 via transport to Sarnia, Ontario and Mont Belvieu, Texas. As the ethane price net back is ~50% of natural gas, selling Marcellus ethane in North America has a negative impact of ~$2 per share.
Our target price is anchored on a $5.25 long-term NYMEX gas price, which is only modestly above the gas price reflected in E&P equities. RRC offers twice the CFPS growth prospects of the sector (’13-’15E) though trades at twice the expensiveness (’13E EBITDA).
Investment highlights

Marcellus, New York

Marcellus, New York (Photo credit: Dougtone)

Liquids-dominant Marcellus footprint: In SW PA, about 110,000 net acres of the company’s Marcellus leasehold is “super-rich” (1,350+ Btu/Scf), ~220,000 net acres is “wet gas” (1,050-1,350 Btu/Scf) and ~210,000 net acres is “dry gas” (<1,050 Btu/Scf). In NE PA, Range has ~145,000 net dry gas acres. Super-rich wells (~3,900’ laterals, ~18 frac stages) recover ~1.4 Mmboe (~60% liquids) and wet gas wells (~3,200’ laterals, ~13 frac stages) recover ~1.5 Mboe (~50% liquids) for a cost of $5-$6 million.
 Superior Mississippian well performance: Mississippian wells (~3,600’ laterals, ~19 frac stages) along the Nemaha Ridge have commenced production at ~500 Boepd and averaged ~400 Boepd the first 30 days and recover ~400 Mboe (33% oil, 33% NGLs, 33% gas) for a cost of ~$3.5 million

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by jackbassteam on April 30, 2013  •  Permalink
Posted in Energy, Fracking, Marcellus
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Posted by jackbassteam on April 30, 2013

http://amp2012.com/2013/04/30/range-resources-corporation/

CHEVRON

Chevron Corporation

Chevron Corporation (Photo credit: Wikipedia)

CVX : NYSE : US$120.1
BUY
Target: US$136.0

What’s new?
Chevron’s 1Q EPS of $3.18 came in 3% ahead of the $3.09 consensus. The company raised its quarterly dividend by 11% and reiterated guidance on share buybacks.
Impact
We reiterate our BUY stance on Chevron, and our $136 price target. In our view Chevron’s growth outlook remains the strongest of the supermajors, and its valuation looks reasonable. Although its near-term free cash yield is limited, this is to be expected given the scale of growth capex, and Chevron continues to have the financial strength to maintain good cash distributions through this phase of the cycle.
Chevron produced 1Q earnings of $6.18bn, with EPS down 3% y/y. Relative to consensus, the main positive variance was in International E&P (c.$0.6bn ahead and +3% y/y), partly due to a lower effective tax rate. Downstream results were mixed. In the US, R&M income was weak at $0.14bn (vs $0.46bn a year ago). Refinery throughputs were down 38% y/y, with heavy maintenance at the Pascagoula and El Segundo refineries. With these now back on line and Richmond now restarting crude processing after its previous fire, results should start to return to normal. International R&M was strong, with income of $0.57bn vs $0.35bn a year ago.
Upstream production volumes were 2645kboed, up 1% y/y. Chevron expects upstream output to grow 1.5% in 2013, and retains its 2017 volume target of 3.3mbd (4.8%pa vs 2012). We forecast 2017 output of 3.12mbd, +4%pa.
Chevron’s 1Q cash flow from operations was weak at $5.7bn. However, this was mostly because of a $3.4bn adverse move in working capital (mostly in downstream), which is expected to reverse in the coming quarters. As a result, the company’s net cash position shrank to $4.9bn at end-1Q vs $9.7bn at YE12.
Cash distributions remain strong. Chevron raised its quarterly dividend from $0.90 to $1.00 (+11%), giving a prospective dividend yield of 3.3%. In addition, it guided to 2Q share buybacks of $1.25bn, unchanged vs previous levels. Combined with the new dividend, this puts Chevron on a healthy distribution yield of 5.5%.
Valuation
Chevron’s shares have 29% upside to our SoP valuation of $155/share vs the supermajor average upside of 34%. The shares trade on a 2014E EV/DACF multiple of 5.5x vs a supermajor average (ex-XOM) of 4.8x.

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by jackbassteam on April 29, 2013  •  Permalink
Posted in Energy, Oil
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Posted by jackbassteam on April 29, 2013

http://amp2012.com/2013/04/29/chevron/

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