TriOil Resources Ltd.

Montney, British Columbia Location

Montney, British Columbia Location (Photo credit: Wikipedia)

TOL : TSX-V : C$2.68
HOLD 
Target: C$3.50

COMPANY DESCRIPTION:
TriOil Resources is a junior oil & gas explorer/acquirer positioned in the Cardium at Lochend and an emerging Dunvegan oil play in Kaybob. TriOil is listed on the TSX-V under the symbol “TOL”.
All amounts in C$ unless otherwise noted.

Investment recommendation
TOL’s Q2 production came in slightly ahead of expectations, as the company continues to show strong growth through the drill bit. Despite limited capital investment during the quarter, 6 Dunvegan wells came on production and contributed to an impressive production increase of 19% over Q1. In the release the company reiterated that the exclusive negotiations with another party continue, and that it expects to provide an update on the negotiations at the end of the month.
Q2 Highlights
 TOL’s production came in at 4,147 boe/d, which was slightly ahead of our estimate of 3,971 boe/d (Exhibit 1). CFPS of $0.21 was in line with our estimate and 2 cents better than consensus.
 During the quarter the company spent just $9 million in capex, drilling one Dunvegan well at Kaybob (Exhibit 2),  completing 3 wells and bringing a total of 6 (4.1 net) on production. In the back half of the year the company plans to drill an additional 9 (6.1) horizontal
wells.
 Field activity has resumed following spring break-up. In addition to continued activity at Lochend and Kaybob, the company is drilling a horizontal Montney well at Pouce Coupe.
Summary
In our view, it was another strong quarter from TOL that should see a positive reaction from the market. Investors will likely continue to focus on the ongoing strategic review, however, with all eyes on the company’s upcoming announcement expected at the end of the month. TOL is rated HOLD, with a C$3.50 target price (our valuation is NAV based and implies a 2013E EV/DACF of 5.0x)

Painted Pony Petroleum Ltd.

Montney, British Columbia Location

Montney, British Columbia Location (Photo credit: Wikipedia)

PPY : TSX-V : C$8.21
BUY 
Target: C$16.00

COMPANY DESCRIPTION:
Painted Pony Petroleum is a junior oil & gas explorer focused primarily on the Montney in northeast British Columbia. Painted Pony is listed on the TSXV under the symbol “PPY”.
All amounts in C$ unless otherwise noted.

PRODUCTION RAMPING UP
Investment recommendation
Painted Pony released Q2/13 results that were largely as expected given that the company had provided a full operational update on July 25.
While there was not a lot of new information in the release, current production levels of 9,200 boe/d (vs. Q2 average of 7,928) are are promisingng, and have the company poised to exit 2012 close to the 10,000 boe/d mark. Painted Pony remains one of our favourite names in the Junior E&P space, as we believe it offers enormous resource potential with a path to value realization.
Q2/13 highlights
 Production: PPY announced Q2 production of 7,928 boe/d, which was slightly above the pre-announced figure of 7,800 boe/d from two weeks ago. Production during the quarter was hampered by wet weather conditions and facility constraints. In July, production averaged 8,700 boe/d and has increased again to a robust 9,200 boe/d in the first week of August. In our view, strong production
figures through the back half of the year have the potential to be a
material catalyst for the stock.
Cash flow: PPY’s CFPS for the quarter came in at $0.14, which was one penny shy of our estimate and consensus. The slight miss to our estimate was largely the result of marginally higher cash costs.
 Montney drilling: Year-to-date, PPY has drilled (or is now drilling) eight (5.6 net) Montney horizontals in NE BC, with another five (4.0 net), planned for the remainder of the year. The latest set of well results, released in the company’s July 25 operational update, included positive well rates from Townsend and Blair

 

Twin Butte Energy Ltd

A workover rig.

A workover rig. (Photo credit: Wikipedia)

TBE : TSX : C$2.05
BUY 
Target: C$3.10

COMPANY DESCRIPTION:
Twin Butte Energy Ltd. is an intermediate producer focused on heavy oil E&D activity within 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 announced its 2012 year-end reserves and an operational update. Its reserve additions and FD&A costs ($24/boe) were in line with
expectations and prior management guidance. From our perspective, the clear takeaway from the release was the workover and performance
update at Primate, where production is up month-over-month to 2,600 boe/d; this should alleviate market concerns over recent production
performance and in our opinion provide a positive tailwind for the stock.
Our NAV estimate drops modestly based on our roll-forward; therefore, we have trimmed our 12-month target price to C$3.10 (from C$3.15)
and maintain a BUY rating on the stock. Our target is based on a 1.0x multiple to NAV and reflects a 2013E EV/DACF multiple of 7.1 times.
Investment highlights
Primate update the key takeaway from the release. Its January 31 update on Primate prompted a massive pullback on the stock; however, the company has announced that production has stabilized at 2,600 bbl/d through February (up from ~2,500 boe/d) given workover efforts,
including installation of five oversized pumps on existing wells (high volume lift). Its operational capabilities are also confirmed by our review
of Frog Lake performance on pages 6 and 7 of our note. Reserve update was in line with expectations. All-in FD&A of $24/boe and a 1.0x recycle ratio were in line. It had 5.3 mmboes of positive extensions (mostly Waseca and Avalon), and it booked 1.6 mm boes at Primate, versus 1.1 mmboes last year with 1.0 mmboes of production.

Valuation
Twin Butte trades at a 0.7x multiple to CNAV, a 5.2x EV/DACF multiple, and $41,200 per BOEPD based on our 2013 estimates, compared to peer
group averages of 0.7x CNAV, 10.6x EV/DACF, and $73,500/BOEPD

Imperial Metals Corp.

Imperial Metals Corp. 
III : TSX : C$13.81
BUY Target: C$22.00

COMPANY DESCRIPTION:
Imperial Metals is a Canadian-based company with interests in two mature producing copper mines in British Columbia (Mount Polley [100%]; Huckleberry [50%]). More importantly, the future and value driver of the company resides in its 100% interest in the very large but undeveloped Red Chris copper-gold project in northwest BC, which is permitted and scheduled to enter production via an open-pit in late-2014.

Investment recommendation


Imperial Metals released its Q4/12 operating results and issued 2013 production guidance that were both above our forecast (Q4/12 Cu production of 13.9 million lbs was 6% above our forecast of 13.2 million lbs; 2013 Cu production guidance of 58.5 million lbs was 11% above our
forecast of 52.6 million lbs) largely due to higher planned grades and recoveries at Mt. Polley.

We are reiterating our BUY rating and increasing our 12-month target price to C$22.00 per share (from C$21.00 per share). Our revised C$22.00 target price is based on a 25/75 weighting of 5.0x our 2013E EV/EBITDA (C$6.50 per share) and 1.0x our revised 10% NPV estimate (C$27.32 per share).

Our BUY rating is supported by the company’s 100% interest in the Red Chris Cu-Au deposit, which in our view, represents one of the only world class assets in the hands of a Canadian mid-tier producer.
Investment highlights
 We now forecast 2013E-2016E Cu production of 59m lbs, 74m lbs, and 143m lbs (previously 53m lbs, 65m lbs, and 135m lbs).

 
Valuation
Imperial is currently trading at a relatively compelling 49.4% discount to our 10% NPV estimate of C$27.32 per share versus a 16.4% discount for
the mid-tier producer peer group average.

Guyana Goldfields – Revised Study

Guyana Goldfields

(GUY : TSX : $4.13)
Shares of Guyana Goldfields jumped after the company announced a revised feasibility study on its 100%-owned
Aurora Gold project.

The estimated initial capital required to achieve commercial production is $205 million and reflects numerous positive changes, in particular, the phased mining and milling approach, reduced footprint of the mine site and facilities, and utilization of an optimized mobile equipment fleet. Based on the key findings of the study, the company will continue to move forward with mine construction and development of the project.

The improved mine plan will produce 3.29 million ounces of gold over an initial 17 year mine life at an operating cash cost of US$527 per ounce (including royalty). Average annual gold production over the life of mine is 194,000 ounces, and averages 231,000 ounces per year over the first ten years. Gold production peaks in 2020 at 349,000 ounces.

Commercial production is expected to commence in Q1 2015. Gold production will be staged, with initial open pit production of 5,000 tonnes per day from the Rory’s Knoll deposit and expanding to 10,000 tonnes per day in early 2018 when underground mining commences. A Bay Street analyst was positive on the study and noted that he believes this is the report that will convince investors that Aurora, re-optimized and re-designed, presents an attractive project with robust economics.

TriOil Resources Q3 Miss But Maintains Potential

Nov. 26

 

Nov. 26

TriOil Resources (TOL : TSX-V : $3.00)
TriOil was under pressure after reporting a Q3 miss, driven mainly by wet weather.

The company reported Q3/12 cash flow of $0.09/share, below consensus expectations $0.12/share. The miss was primarily due to lower realized prices ($60.49/boe vs. estimates of $64.76/boe). Production was also ~250 boe/d lower than expected due to ~70 boe/d of non-core dispositions and wet weather causing delays at Kaybob. Unseasonably wet weather, particularly in Kaybob, also impacted drilling and new tie-in operations.

In the quarter, the company drilled 11 (7.9 net) wells – 7 (5.6 net) Dunvegan wells at Kaybob and 4 (2.3 net) Cardium wells at Lochend. In all, 7 (3.3 net) wells were brought on production.

According to the company, activity levels have remained high since mid-summer and they still plan to execute their full 2012 capital program
in both of key light oil projects at Lochend and Kaybob. So far this quarter, the company has drilled 3 (1.6 net) wells, 4 (2.7 net) wells have been completed, 6 (3.8 net wells have been placed on production and 2 (1.6 net) wells are currently drilling.

Prior to year-end, 6 (4.4 net) wells are expected to be brought on production. Current production is around 3,000 boe/d (75% oil) based on field estimates with a current estimated 400 boe/d of tested volumes expected to be on stream by year-end.

A Bay Street analyst commented that given Q3/12 results he now expects 2012E average production to come in lower than guidance of 2,300–2,500 boe/d. However, with current production now at ~3,000 boe/d and several wells left to come on production, 2012 exit guidance of 3,400–3,600 boe/d appears to be safe. The analyst reiterated their bullish stance, noting that TriOil has a strong balance sheet, a promising growth outlook and a potential near-term reserve catalyst at Kaybob.

Hyperion Exploration Corp. Announces Third Quarter 2012

English: Oil drop icon

English: Oil drop icon (Photo credit: Wikipedia)

Nov 16

Company NR

2012 highlights and operating results for the quarter ended September 30, 2012. Selected financial and operational information is outlined below and should be read in conjunction with Hyperion’s unaudited financial statements and related management discussion and analysis which will be available for review under Hyperion’s SEDAR profile at http://www.sedar.com.

Q3 2012 Highlights

The following represents the highlights of Hyperion’s third quarter 2012 operations:

--  Record average production in Q3 2012 of 1,522 boe/d (64% light oil and
    NGLs), a 45% increase compared to the Q3 2011 production average of
    1,050 boe per day (54% light oil and NGLs);

--  Record Q3 2012 funds flow of $4.2 million or $0.08/share, a 69% year
    over year increase;

--  Enhanced Niton/McLeod undeveloped land position via farm-in providing a
    combined total of 35,680 gross (32,508 net) acres of Cardium rights and
    future growth potential with an un-booked drilling inventory of 191
    gross (172 net) light oil locations;

--  Continued to achieve operating efficiencies, increasing field netbacks
    from $30.32 per boe in Q3 2011 to $34.84 per boe in Q3 2012;

--  Reduced operating costs from Q2 2012 to $10.38/boe, a decrease of 12%;

--  In Q3 2012, Hyperion expended total capital, including land acquisitions
    and work overs, of $3.6 million;

--  Drilled 1 gross (0.89 net) Cardium light oil well in the Niton/McLeod
    area which was completed and tied-in in Q4 2012;

--  Completed and tied-in 1 gross (0.85 net) Cardium light oil well in the
    Garrington area that was drilled in late Q2 2012; and--  Equipped and tied in 1 gross (0.5 net) Cardium light oil well in the
    Pembina area that was drilled late in Q1 2012.

Niton/McLeod Cardium Light Oil Development Update

During the third quarter, Hyperion drilled 1 gross (0.89 net) Cardium light oil horizontal well at McLeod (“02-02″ well), over 20 kilometers (12 miles) from the Company’s first Cardium horizontal light oil well (“05-14″ well). The 02-02 was completed and placed on production in late October and has achieved a production rate of 209 boe/d (87% oil) in its first 21 days of production (IP21). The current performance of 02-02 is on track to exceed the Company’s risked production profile of IP30 161 boe/d (92% oil) for a Cardium horizontal light oil well at Niton/McLeod

The results of 02-02 are very encouraging and support the continued development of the Company’s inventory of 191 gross (172 net) potential locations at Niton/McLeod.

Operations Update

Hyperion achieved record production in the third quarter as a result of its successful drilling program in the first of half of 2012 in the Garrington and Pembina areas, highlighting the low risk, high quality nature of these assets. Typically, the Company would look to expand its drilling inventory in these areas to continue the track record of growth.

Paladin Energy Year End Update

Paladin Energy  (PDN : TSX : $1.38)

 August 31

Paladin Energy reported year-end financial and operational results.

For the year ending June 30, 2012, the company produced a record 6.895 million pounds of U308, an increase of 21% from the previous year. The company’s Langer Heinrich mine produced 4.417 million pounds and its Kayelekera mine delivered 2.478 million pounds, with the project running at 90% nameplate capacity for the last eight months.

Average cash costs for the year came in at $39 per pound, compared to $35 per pound last year. PDN noted that both mines now, for the first time, are operating without concurrent construction expansion programmes, which will allow a strong focus on operational and cost optimisation for the coming year.

For the upcoming year the company will focus on improving its cash costs. The company has approved a cost reduction in 2011 to target reducing corporate and marketing costs by at least 15%. Tighter controls have led to a reduction of corporate overheads, including travel costs and outsourced work. Labour costs have also reduced as the high capital investment phase that the company was in has now largely been completed. The company also noted that in Labrador, the three-year moratorium on the mining, development and production of uranium ended providing access to the Michelin deposit and validating the company’s decision to acquire the Aurora uranium assets at a discounted price of US$1.90/lb U3O8. The ending of the moratorium has cleared the way for the company to re-commence work on the project with substantial long-term resource increases are expected.

 

 

Pinecrest Energy Q2

August 30

Pinecrest Energy (PRY : TSX-V : $1.85)

Wet weather may have weakened Pinecrest’s Q2 but the company‘s exit guidance appears intact.

Pinecrest reported Q2/12 results which were largely in line with estimates, with production of 2,951 BOE/d slightly lower than 3,048 BOE/d estimate and CFPS .07 ,  (Bloomberg consensus had $0.08). Production was down in the quarter due to wet weather, a component of which involved the company’s propane driven pump jacks (the weather prevented these from being refilled). Prior to planned electrification in 2013/2014, the company will simply double up its onsite propane capacity to avoid a repeat.

Within the quarterly numbers were higher operating costs and G&A that was partially offset by lower royalties and transportation costs. On a go-forward basis, the lower royalties should trump the other impacts, as costs are expected to continue decreasing on a per BOE basis as production ramps.

Current production at the company is quoted at 3,050 BOE/d with 10 (9.5 net) wells drilled and in various stages of completion or tie-in;three rigs are now in the field with a fourth arriving in early September. Exit guidance of 5,000 to 5,200 BOE/d was reiterated and only minor tweaks to our model were required. The last point of interest in the release was a 4-5 times production uplift seen in two producing wells that offset the company’s joint waterflood effort at Evi. Three additional waterfloods are planned, with approval on the first imminent. Kristjansen reiterated his bullish stance on the stock noting that his current estimates include no downspacing or waterflood upside. Also, the company’s 99%+ light oil weighting and low royalty/cost structure continues to provide it with the top netbacks in the industry ($63.97 per BOE in Q2/12). 

     F orecast horizon  ; expecting 127% and 59% production per share growth in 2012 and 2013,respectively .

PetroBakken Energy Ltd. Update Target $19.50

PetroBakken Energy

PetroBakken Energy (Photo credit: Wikipedia)

PetroBakken Energy Ltd.
PBN : TSX : C$13.11  Buy , Target C$19.50

August 10
• Quiet Q2 holds few surprises; reiterating BUY and Target to C$19.50 
Event
PetroBakken reported Q2/12 results yesterday, with in line production of 38,715 BOE/d (the company pre-announced field estimates on July 9) with associated CFPS, f.d. of $0.62 relative to our $0.64  latest Bloomberg consensus of $0.66. The $0.02 difference in our estimate related to a 1% gassier production mix and higher operating costs.
We expect operating costs to fall back in H2/12 as production ramps and to stay lower in 2013 post-planned infrastructure buildout. July production is quoted at 38,250 BOE/d with production weighted to H2/12 as a result of 27 net wells awaiting completion or tie-ins and 14 rigs operating in the Bakken and Cardium.
Q2/12 activity was characteristically quiet, with only 9 net wells drilled in the quarter. Instead, the headline items included a $61 million non-cash impairment charge relating to the expiry of 45 net sections of Horn River acreage (the remaining land has tenure, though the company is in no hurry to spend money on gas prospects) and the appointment of George Gervais (formerly with ARC Resources since 1999 as VP Business Development and previously Manager of Engineering) as VP Exploitation.

Impact
Neutral. Operating costs should decrease on a per unit basis as they did in 2011 when the company ramped H2/12 production. We had previously forecast a Q3/12 average of 42,500 BOE/d, which while still possible given the stable of pending wells and rig activity, has been tempered in our forecasts to 40,875 BOE/d. No changes to our Q4/12 forecast (of 51,019 BOE/d) or our 2013 average production, although the carry forward of the 1% gassier mix (which we attribute to the growing percentage of production sourced from the Cardium) marginally reduces forecast cash flow.
Recommendation
BUY recommendation . Our target remains based on a 6.0x 2013E EV/DACF multiple supplemented by $3.52 of risked Bakken and Cardium upside. Management has reiterated its forecast exit rate of 52,000 to 56,000 BOE/d, which we believe is readily attainable, considering the precedent ramp-up in 2011.

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