Pine Cliff Energy Ltd. BUY

PNE : TSX-V : C$1.42

BUY 
Target: C$2.25

COMPANY DESCRIPTION:
Pine Cliff Energy Ltd. is a junior oil and gas producer
focused on dry natural gas, with assets in Alberta. Pine
Cliff trades on the TSX Venture under the symbol “PNE”.

All amounts in C$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
TIME TO GAS UP
Investment recommendation
We are initiating coverage of Pine Cliff Energy with a BUY rating and a
C$2.25 target price. PNE has had a great run over the last year,
increasing its share price by ~60%, but in our view, this is just the
beginning. Driven by accretive acquisitions and a rebounding gas price,
we expect this stock to go materially higher over the coming year, as
reflected in our forecast return of 58%. Our valuation is NAV based and
maps to a 2014E EV/DACF of 14.7x.
Why we believe this stock is set to outperform:
 Gas Leverage to the Extreme. Simply the best way to gain
exposure to rising gas prices, in our view, given a production
base that is 95% dry gas with no hedging in place. As
highlighted in Exhibits 1 and 2, PNE is the most levered
company to natural gas prices in our coverage universe, with a
$1 increase in AECO prices driving an increase to estimated
CFPS of ~40% and an increase to NAV of over 40%. In our view,
if you want to own gas, you want to own Pine Cliff.
 Acquisitions to drive performance. PNE has taken a contrarian
approach by purchasing dry gas while others chase oil and
NGLs. The last two significant acquisitions by the company over
the last year have resulted in share price bumps of 46% and
36%, respectively. PNE currently trades at 9.0x 2014E
EV/DACF, but as we walk through in Exhibit 3, if the company
were to buy $100 million in assets at 5x cash flow, this multiple
would be just 6.8x 2015E estimates. Use a 5$ AECO price and
it’s at just 5.4x.
 Our Call? Give this management team your money. George Fink
is well respected as an excellent steward of capital, and for
good reason. Early investors in Bonterra Energy (BNE: TSX: Not
Covered) have been handsomely rewarded over the last 16
years, with a CAGR of 45% since 1998. In addition to the energy
space, Mr. Fink has also had success in mining, where at
Comaplex Minerals he provided investors with a CAGR of 21%
over a 15 yeear period.
Our C$2.25 target price is based in part on our assumption that the
company will be successful in completing $150 million in acquisitions
over the next year and post transaction its multiple will return to the
natural gas peer group average of 9.0x EV/DACF

Quicksilver Resources – Momentum Is Still To The Downside

Watch – Don’t Buy Until A Reversal Is Confirmed

In my book The Apprentice Millionaire Portfolio ( available on Amazon) I outlined the profits made as I chased Peyto Exploration( PEY ) an Alberta based natural gas producer from below $8 to above $30. As I am happy to report this one investment paid for my daughters to go to University.

I thought I had / have ? detected the same promise in Quicksilver Resources  ( KWK) at the end of 2013. It has suffered – I should say the shareholders have suffered greatly – and now it appears their profit salvation is at hand- or at least so it appeared when the stock went to the $3.50 level and 30% was still short. I had along with many others anticipated a rising nat gas price , rising stock price and short interest would propel the stock price. It did not happen and – again to quote Keynes ” When the facts change , I change ( my opinion) – what do you Do ?”

The point is that when your investing thesis proves wrong – get out and place your funds elsewhere. Don’t become wedded to a losing proposition . Not every investment decision can possible work out as we  ( optimistically ) anticipate.

Here is a one year chart – note Jack A. Bass Managed Accounts entered / exited  at the end of 2013  and beginning of 2014

Problem copying chart – available at stockcharts.com

Quicksilver Resources Inc(KWK:NYSE, US)

BuySell
2.63USDDecrease0.05(-1.87%)Volume:
Above Average
As of market close 21 Mar 2014.

Quote Details

Open 2.70 P/E Ratio (TTM) 2.9x
Last Bid/Size EPS (TTM) 0.92
Last Ask/Size Next Earnings 5 May 2014
Previous Close 2.68 Beta 2.02
Volume 13,051,380 Last Dividend
Average Volume 4,882,480 Dividend Yield 0.00%
Day High 2.86 Ex-Dividend Date
Day Low 2.59 Shares Outstanding 177.2M
52 Week High 3.67 # of Floating Shares 123.9008M
52 Week Low 1.44 Short Interest as % of Float 25.72%
 It failed to hold – despite record withdrawls from the natural gas storage and brutally cold weather in the nat gas fuel area of the north eastern U.S. I got in and out at that level and am watching the stock. It offers great promise – but they used to say the same thing about me.
The recent quarterly results did nothing to help the stock now a recent asset sale to reduce massive debt.
The recovery is still ” just over the horizon “. The book ” The True Believer” offers the psychological insight into those committed to an idea remaining committed long after any analysis could justify the continued commitment.
This is a stock to watch but to paraphrase    – the old saying  –  ” you can go bankrupt long before the market becomes rational “.
Repeated efforts to guess where the bottom is has caused many a holder to suffer with this stock. Jack A. Bass Managed Accounts broke even on this one and I hope may profit in adding this in the future – BUT NOT TODAY.
 NOTE:The same reasoning applies  is our continued interest in the shipping sector – closer to a recovery with the recent recovery of the Baltic Dry Index.
Recent Results :
Quicksilver Resources Reports Preliminary 2013 Fourth-Quarter and Full-Year Results

14 Mar 2014 – ACQUIREMEDIA

FORT WORTH, Texas, March 14, 2014 (GLOBE NEWSWIRE) — Quicksilver Resources Inc. (NYSE:KWK) today announced preliminary 2013 fourth-quarter and full-year results.

2013 and Q1 2014 Highlights:

– Raised proceeds and announced sales for total of $596 million

  •   Sold 25% interest in Barnett Asset to TGBR, a subsidiary of Tokyo Gas Co., Ltd., for net proceeds of $464 million
  •   Sold Montana Asset to Synergy Offshore LLC for net proceeds of $42 million
  •   Announced sale of Niobrara Asset along with SWEPI LP to Southwestern Energy Co., which is expected to generate cash proceeds of $90 million

– Refinanced $1.1 billion in debt, extended maturities and reduced weighted average interest rates

– Increased pro forma proved reserves by 20%

– Secured partners on the West Texas Asset and narrowed focus on core Wolfcamp to Pecos County

– Added to the 2014 derivative position; approximately 75% of expected 2014 equivalent production covered with commodity swaps at a weighted average price of $5.08/Mcfe

– Resumed Barnett drilling activity in the third quarter with the goal to rebuild volumes

– Secured amendment to lower gathering rate and defer capital spending requirements in the Horn River Basin

– Secured site for potential LNG exports from Canada

“Over the last year, Quicksilver has reduced debt, enhanced liquidity, and advanced projects,” said Glenn Darden, Quicksilver’s Chief Executive Officer. “We have more work to do, but with the improvements made, and what we believe will be more to come, 2014 is shaping up to be a significant year for this company

Raging River Exploration Inc

RRX : TSX : C$7.95  
BUY  Target: C$9.00

COMPANY DESCRIPTION: Raging River Exploration Inc. is a junior E&P company focused on the development of the Viking light oil resource play in Saskatchewan.

Energy — Oil and Gas, Exploration and Production INCREASED GUIDANCE AND NEW FARM-IN ACREAGE
Investment recommendation

Raging River announced fourth quarter results and an operational update which was highlighted by continued momentum in the first quarter, a new 100 section farm-in transaction, and increased guidance given a capital spending increase related to new farm-in well plans.  Overall, the release was positive and reinforces our positive view of the stock. The increased inventory and growth related to the farm-in adds $0.40 of value to our NAV and a commensurate $0.50 per share increase to our target to C$9.00, which is based on an unchanged 1.1x multiple to NAV and a 9.1x EV/DACF multiple.
Investment highlights Step out success at Forgan. Assuming its new wells track a Tier 6 curve and one of its six wells at Forgan was drilled on a section with no prior inventory assigned and the other five were on sections with a prior Tier 4 assignment, we estimate the value uplift from its step out success year- to-date to be ~$65 million.
Surging forward with a new farm-in. Raging River announced a farm-in transaction with an industry partner on 100 (95 net) sections at Dodsland. Based on its updated presentation, we suspect the farm-in was on Surge Energy (SGY: TSX, BUY, covered by Anthony Petrucci).  The transaction is positive as it adds ~60 low to medium risk drilling opportunities and potential upside to 360+ locations upon success.
Guidance gets a lift.  2014E CAPEX increases by $20 million to $235 million with a commensurate increase to average and exit production rates implying incremental capital efficiency of ~$40,000/boepd.
Valuation Raging River currently trades at a 0.9x multiple to CNAV estimate, 8.4x EV/DACF, and $157,500/BOEPD based on our 2014 estimates vs. its peer group averages of 0.7x CNAV, 6.7x EV/DACF, and $83,200/BOEPD

Quicksilver Resources ( KWK) – no respect for the effort

Glenn M. Darden – Chief Executive Officer, President, Director and Member of Equity Awards Committee

Thank you, David. Good morning. Today, Quicksilver reported earnings for the fourth quarter and for the full year 2013. For the fourth quarter of ’13, we had an adjusted net loss of $5 million. The full year reported earnings were positively impacted by the sale of the Barnett properties to Tokyo Gas. And John Regan, our Chief Financial Officer, will give you the financial detail following my remarks.

Quicksilver’s concentration has been on improving the company’s balance sheet and liquidity, and as a result, 2013 was more of a defensive year. On the financial front, we lowered net company debt approximately $300 million to the end of the year. We also refinanced $1.1 billion of company bond debt, which reduced interest expense and extended debt maturities by 2.5 years. We have relied on asset sales to lower debt.

 

Quicksilver Resources Reports Preliminary 2013 Fourth-Quarter and Full-Year Results

       Fri March 14, 2014   7:00 AM|GlobeNewswire          | About:         KWK

FORT WORTH, Texas, March 14, 2014 (GLOBE NEWSWIRE) — Quicksilver Resources Inc. (KWK) today announced preliminary 2013 fourth-quarter and full-year results.

2013 and Q1 2014 Highlights:

– Raised proceeds and announced sales for total of $596 million

  •   Sold 25% interest in Barnett Asset to TGBR, a subsidiary of Tokyo Gas Co., Ltd., for net proceeds of $464 million
  •   Sold Montana Asset to Synergy Offshore LLC for net proceeds of $42 million
  •   Announced sale of Niobrara Asset along with SWEPI LP to Southwestern Energy Co., which is expected to generate cash proceeds of $90 million

– Refinanced $1.1 billion in debt, extended maturities and reduced weighted average interest rates

– Increased pro forma proved reserves by 20%

– Secured partners on the West Texas Asset and narrowed focus on core Wolfcamp to Pecos County

– Added to the 2014 derivative position; approximately 75% of expected 2014 equivalent production covered with commodity swaps at a weighted average price of $5.08/Mcfe

– Resumed Barnett drilling activity in the third quarter with the goal to rebuild volumes

– Secured amendment to lower gathering rate and defer capital spending requirements in the Horn River Basin

– Secured site for potential LNG exports from CanadaQuicksilver Resources Inc(KWK:NYSE, US)

BuySell

 

2.62USDDecrease0.15(-5.42%)Volume:
Above Average
As of 14 Mar 2014 at 3:12 PM EDT.

Quote Details

Open 2.74 P/E Ratio (TTM)
Last Bid/Size 2.62 / 58 EPS (TTM) -2.13
Last Ask/Size 2.63 / 120 Next Earnings 14 Mar 2014
Previous Close 2.77 Beta 2.02
Volume 3,921,026 Last Dividend
Average Volume 3,886,999 Dividend Yield 0.00%
Day High 2.81 Ex-Dividend Date
Day Low 2.53 Shares Outstanding 177.1M
52 Week High 3.67 # of Floating Shares 123.8212M
52 Week Low 1.44 Short Interest as % of Float 25.72%

 

 

Quicksilver Update from motley fool

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of Quicksilver Resources Inc. (NYSE: KWK  )  were slipping today, falling as much as 10% and finishing down 7% after it agreed to sell land to Southwestern Energy.

So what: The oil-and-gas producer said it would sell all of its jointly owned holdings in Northwestern Colorado’s Sand Wash Basin, a total of 312,000 acres, for $180 million, half of which it will keep after dividing the payment with SWEPI LP. CEO Glenn Darden said the sale “enables us to focus our development efforts on the Barnett and Canadian projects as well as our previously announced joint ventures in West Texas, and provides the opportunity to enhance company liquidity.”

Now what: The deal is expected to close on May 1, and Southwestern could begin drilling as early as June. Quicksilver has nearly $2 billion in debt on its balance sheet so a $90 million infusion looks like just a drop in the bucket as far as liquidity is concerned. The market seems to view the sale as a poor deal for Quicksilver as it’s giving up a “liquids-rich resource play” for what seems a relatively insignificant cash sum. We may even similar land sales as management seems to be saying it could benefit from greater liquidity and streamlining operations, not a surprise considering Quicksilver’s been operating at a loss. We should learn more about the sale and the company’s future prospects when it reports earnings next week. Analysts are expecting a loss of $0.03 a share.

Peyto Exploration & Development Corp.

Personal note : my daughters went to college on the money I made tracking Peyto from $ 8 to $30

PEY

TSX : C$34.92 
HOLD  Target: C$39.00

 COMPANY DESCRIPTION: Peyto Exploration is a low-cost gas-weighted dividend paying intermediate E&P focused on horizontal drilling in the Deep Basin of Alberta, Canada with highly contiguous land and multi-zone gas potential.
All amounts in C$ unless otherwise noted

Oil and Gas, Exploration and Production GOING LONGER IN 2014 
Investment recommendation

Peyto announced fourth quarter results which were largely in line given pre- announced production and capital expenditures. Its infrastructure remains highly utilized and requires further expansions this year to accommodate growth; Peyto remains poised to do that given ~100 MMcf/d of capacity expansions planned this year. It has noticeably moved to longer lateral horizontals given licenses to date and we see the potential for a 10% improvement in IRR and capital efficiencies from ERH development. Peyto remains one of the highest quality natural gas producers in the Basin and a go-to name for exposure. We maintain our HOLD recommendation and C$39.00 target; however, we will continue to monitor the share price for any improvement in valuation (all other factor being equal).
Investment highlights Envision little change to 2014 budget despite firmer gas prices. Despite higher natural gas prices, we see a low probability of any meaningful increase to its $600 million budget given lead time and infrastructure planning. Additionally, PEY has hedged ~55% of 2014 production at ~C$3.70/Mcf, so it has a relatively modest upside participation.
Going longer in 2014.  Peyto has noticeably shifted its licensing and 2014 well program to extended reach horizontal (ERH) wells. Its average well length in 2013 increased by 7% or 100 meters YoY; we see the potential for a material increase in 2014. It is still early in terms of results and costs for Peyto-operated ERH wells; however, we believe ERH wells could provide a +10% improvement in capital efficiency and +10% uplift in IRR per well, which are not captured in current forecasts.
Valuation Peyto currently trades at a 1.1x multiple to CNAV, 11.3x EV/DACF multiple, and $83,400/BOEPD based on our 2014 estimates, versus peer group averages of 0.8x CNAV, 8.1x EV/DACF, and $77,000/BO

Painted Pony – About To Run

Painted Pony Petroleum* (PPY : TSX : $8.76), Net Change: -0.02, % Change: -0.23%,

Volume: 1,073,162

A staggering amount of running room. In Painted Pony’s reserve update Tuesday night, the company announced a substantial increase in both 2P reserves and contingent resource. PPY reported 2013 year-end reserves of 290.3 mmboe, which was in increase of 52% over 2012 levels (also 52% on a per share basis). This was ahead of Petrucci’s expectations. The large increase to reserves boosted Canaccord NAVPS estimate by 38%, and as a result he has increased his PPY target price.

In Cannccords view, PPY’s Montney potential continues to be significantly undervalued by the market. With 1.7 TCF of booked reserves and another 7 TCF of contingent resources, PPY has a staggering amount of running room in the Montney that we believe will attract buyers who can capture value by accelerating the development of the resource. Petrucci highlights that PPY continues to be his favourite stock amongst the natural gas-weighted junior E&P’s

Natural Gas Sector Update

Natural gas companies are likely taking advantage of these higher ngas prices and looking to lock in some hedges. Case in point, ngas giant Encana has significantly increased its hedge position which is now at about 80% of 2014 forecasted gas production from the prior 57%. (CG13Feb2014)  Past interviewees told us $3.50 was the new line in the sand for operators and here we are near the $6 mark! Traders and investors have been reacting to the low level of inventories (check out the current trend/chart below), the cold weather and probably short covering. While inventories have been dramatically reduced this winter at a faster pace than normal, here are some points for those trading this commodity.
• One, there have been winters where the drawdown has brought inventories down to levels lower than where we are today – including last year, 2011, 2010 and 2004. However, those lower levels were reached at later period in the season (inventories usually bottom in March or in some years April).
• Two, the sustainability of these high prices will depend upon the price of oil and coal for industrial switching consideration; production levels – and how hot this summer will be.  (BNN 20F )

Natural gas prices climbed above $6/mmBtu for the first time in four years Wednesday, as traders anticipated higher demand for the heating fuel following forecasts of continued cold weather. The frigid winter has increased natural gas demand as people in the Midwest and Northeast U.S. have kept their furnaces running. About half of U.S. households use natural gas as their primary heating fuel. Currently, the March contract is trading more than $1/mmBtu above the contract for April delivery, indicating that buyers are willing to pay more to secure supplies before the winter ends. Some market followers expect supplies at the end of the winter heating season in March to be at their lowest level in six years. (CG 19Feb14)
• You think ngas prices are getting up there here in North America? That’s nothing, check this out0on Tuesday, Platts reported that “Asia Spot LNG Prices for March delivery hit highs finishing at the all-time high of $20.20/MMBtu on February 14 for March delivery.” (18Feb2014)

Top picks in the ngas sector 
Top U.S. & Canadian natural gas E&P names: Energy XXI (EXXI-NASDAQ) is Canaccord’s top U.S. E&P pick with significant gas exposure. He likes it for the emerging horizontal drilling program in the GOM, a history of generating free cash and potential upside from its exploration program. The emerging salt play is an exciting opportunity and the company has identified over 2 billion Boe of resource potential to unlock using modern technology, like Wide Azimuth seismic in the GOM shelf.
Our top Canadian Intermediate E&P stock remains Bellatrix Exploration (BXE-tsx) given its attractive valuation, high leverage to gas prices and leading capital efficiencies.  On the small cap side , Painted Pony Petroleum (PPY-tsx) provides the greatest leverage to rising gas prices with upcoming LNG activity providing another potential tailwind for the stock in 2014.  For pure torque to an AECO basis improvement, we recommend Paramount Resources (POU-tsx) which is highly levered to changes in gas price movements and is poised to more than double production over the next 12 months. We do not view Encana (ECA-tsx) as a go-to gas name owing to its large hedge position.

Canadian Natural Resources Ltd.

CNQ : TSX : C$40.63

CNQ : NYSE
BUY  Target: C$46.0

COMPANY DESCRIPTION: Canadian Natural is one of the largest independent crude oil and natural gas producers in the world with a diversified and balanced asset base of natural gas, heavy oil, oil sands and light oil.
All amounts in C$ unless otherwise noted.

COMPANY DESCRIPTION: Canadian Natural is one of the largest independent crude oil and natural gas producers in the world with a diversified and balanced asset base of natural gas, heavy oil, oil sands and light oil.
All amounts in C$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production ADDING SIGNIFICANT PRODUCTION AT A LOW COST

We reiterate our BUY rating on CNQ post yesterday’s announcement to acquire Devon Energy’s (DVN : TSX| Not rated) Canadian conventional asset package (ex- Horn River basin and heavy oil properties) for $3.12 billion for the following reasons:
While, we were surprised by the move, CNQ did take advantage of the “buyers” market in Canada. It is evident there are plenty of asset packages on the market; recall CNQ retracted its own Montney package on 1/9 due to lack of sufficient interest. To that end, the company paid ~$36,000/boe/d unadjusted ($30,300 per boe/d adjusted for infrastructure), which looks like a steal compared to precedent transactions of ~$51,700/boe/d especially given the higher gas price environment.
The transaction is also accretive on a cash flow basis. To that end, we estimate that CNQ is paying 4.5x 2015E DACFs (when adjusted for infrastructure), which is a discount to the 5.4x that CNQ was trading at prior to yesterday.
Potential spin out of royalty assets. The company plans to either monetize or spin out the combined $140-$150 million annual cash flow royalty free lands post acquisition. Based on Freehold Royalty Trust’s (FRU: TSX | Not rated) current trading multiple, this asset is worth an estimated $1.2-1.3 billion or $1.08-1.16/share.
Balance sheet still looks strong post acquisition. At our price deck, debt/EBITDA is estimated to be 1.13x vs. the peer average of the same level, and CNQ’s pre-acquisition metric of 0.93x.
Still the torque play in the Sr’s space on our positive heavy oil thesis. We estimate the company will still be ~40% levered to heavy oil in H2/14 (down slightly from the prior ~45%), and thus will continue to benefit from our thesis on narrowing differentials.
We are increasing our target by $1 to $46 to reflect the accretion from the acquisition

Quicksilver Resources – Breakout

Natural Gas up this morning – well over $ 5

Natural gas retreated after surging the most in almost a week as cold weather swept across the U.S.

Futures for March delivery fell as much as 2.3 percent to $5.252 per million British thermal units in electronic trading on the New York Mercantile Exchange and were at $5.275 at 11:28 a.m. Singapore time. The contract rose 47 cents, or 9.6 percent, to settle at $5.375 yesterday, the biggest gain since Jan. 29. The volume of all futures traded was about 33 percent below the 100-day average. Prices are up 25 percent so far this year.

MDA Weather Services predicted below-normal temperatures in most of the lower-48 U.S. states through Feb. 13. A winter storm will continue to move east today with heavy snow forecast from central Kansas to the Northeast and ice accumulation possible from Arkansas into the Ohio River Valley, according to the U.S. National Weather Service.

“A winter storm moving across the Midwest eastward through the Northeast will be followed by another plunge of Arctic air into the center of the country,” the weather service said in a forecast yesterday. “The southwestern U.S. will be the only area of the country spared from this Arctic blast.”

An Energy Information Administration report Feb. 6 may show that natural gas inventories slid by 267 billion cubic feet last week, according to the median of 10 analyst estimates compiled by Bloomberg. The five-year average decrease is 151 billion.

Commodity Weather Group LLC in Bethesda, Maryland, said January was the coldest first month of the year in the contiguous U.S. since 1994, in terms of gas-weighted heating degree days, a measure of energy demand. About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, according to the EIA, the Energy Department’s statistical arm.

 

Short interest remains at 25 %

Now 25 cents from its 52 Week High

QUICKSILVER RESOURCES INC(KWK:NYSE, US)

BuySell
3.31USDIncrease0.21(6.77%)Volume:
Above Average
As of 04 Feb 2014 at 1:26 PM EST.
QUOTE DETAILS
Open 3.11 P/E Ratio (TTM)
Last Bid/Size 3.31 / 43 EPS (TTM) -2.13
Last Ask/Size 3.32 / 25 Next Earnings 11 Mar 2014
Previous Close 3.10 Beta 1.82
Volume 3,745,204 Last Dividend
Average Volume 3,249,218 Dividend Yield 0.00%
Day High 3.33 Ex-Dividend Date
Day Low 3.09 Shares Outstanding 177.1M
52 Week High 3.54 # of Floating Shares 123.7796M
52 Week Low 1.44 Short Interest as % of Float 24.77%
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