Raging River Exploration Inc. Remains Top Pick Junior Oil and Exploration

RRX : TSX : C$4.98
BUY 
Target: C$5.50

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, and trades on the TSX under the symbol RRX. The company was created from the spin-out of assets following Crescent Point’s acquisition of Wild Stream Exploration in 2012.
All amounts in C$ unless otherwise noted

Investment recommendation


Q2 results presented no surprises given the company pre-released its estimated production for the quarter in its operational update on July 16. The principal takeaways were the third consecutive increase to its 2013 guidance and the company’s continuous step-out drilling successes to date. Raging River remains one of our top Junior stock recommendations as it provides investors with a solid strategy of strategic resource capture acutely focused in the Viking resource play in
southwest Saskatchewan, and a best in class management team with a history of value creation and development execution.

We have  maintained our BUY rating and C$5.50 target price based on an unchanged 1.1x multiple to NAV and a 7.4x 2014 EV/DACF multiple.
Investment highlights
Q2 in line. Second quarter production averaged 4,620 boe/d, in line with our estimate of 4,594 boe/d and consensus of 4,425 boe/d. Operating CFPS came in at $0.15, in line with CG/consensus of $0.15.
Third guidance increase. The company upwardly revised its guidance for a third time this year; although capital spending and production both rose, the company continues to deliver above type curve results.
Management does an enviable job consistently beating expectations. Inventory expansion a key theme. The company recently drilled and tested nine wells at Beadle, seven of which were drilled in previously untested sections. Management estimates the NPV value uplift from this type of inventory expansion to be in the range of $50 to $100 million.
Valuation
Raging River currently trades at a 1.0x multiple to CNAV estimate, 7.6x EV/DACF, and $163,200/BOEPD based on our 2013 estimates vs. its peer group averages of 0.7x CNAV, 6.1x EV/DACF, and $77,700/BOEPD.

Long Run Exploration Ltd.

LRE :

TSX : C$4.03 BUY 
Target: C$6.25

COMPANY DESCRIPTION:
Long Run Exploration is a junior oil & gas explorer with assets focused largely in Alberta. Long Run is listed on the TSX under the symbol “LRE”
All amounts in C$ unless otherwise noted.

Long Run reports strong Q2; highlights operational success Long run’s Q2/13 production of 24,431 boe/d was slightly ahead of  guidance and highlights the company’s continued operational success following the business combination of Westfire and Guide, as production continues to grow from the 2012 exit rate of 23,000 boe/d. LRE is one of our favoured names in the Junior and Intermediate space, as we believe current management has the company heading in the right direction and continued execution will prompt a re-rating of its trading levels

Investment highlights

 LRE’s production of 24,432 boe/d was slightly ahead of guidance and was up from Q1 levels of 23,600 boe/d. CFPS of 0.50 was ahead  of our estimate at $0.46, and well ahead of consensus $0.44.
 As highlighted in Exhibit 1, most of the cash flow beat came from  lower than expected royalties, due to a GCA credit that was realized during the quarter. During the quarter the company spent ~$39 million (largely in line with our estimate) primarily on the drilling of  4 Montney horizontals at Girouxville and Normandville, and 6 net  Viking wells at Redwater. Well results from these areas continue to exceed expectations.

 LRE marginally increased its operating budget for the year (from $265 to $275 million) due to a slight increase in incidental costs. The bulk of its $115 million budget for the year will be spent in Q3 as LRE continues to push forward its Montney and Viking programs.

Summary
LRE’s Q2 contained little new information, and we do not expect a material reaction from the market to the Q2 release in today’s trading. That said, the company has strung together another solid quarter and in our view is clearly demonstrating that its trading discount is not warranted.

Raging River Exploration Inc.

'Raging River' log flume, Ocean Park

‘Raging River’ log flume, Ocean Park (Photo credit: thewamphyri)

RRX : TSX-V : C$4.19
BUY 
Target: C$5.50

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, and trades on the TSX under the symbol RRX. The company was created from the spin-out of assets following Crescent Point’s acquisition of Wild Stream Exploration in 2012.

Investment recommendation
Raging River announced its second positive revision to its annual guidance this year; its annual average and exit production both have increased by 100 boe/d. Despite a modest 2% increase in guidance, we believe the market will react very positively to the revision, especially in light of profound wet weather impacts on producers across the Basin in the second quarter (and the resulting delayed return to drilling and completion operations post spring breakup) and an unchanged capital program this year.

RRX remains one of our top Junior stock recommendations as we believe it provides investors with a solid strategy of strategic resource capture acutely focused in the Viking resource play in southwest Saskatchewan, and a best in class management team with a history of value creation and development execution. We have maintained our BUY rating and C$5.50 target price based on an unchanged 1.1x multiple to NAV and an 8.0x 2014 EV/DACF multiple.
Investment highlights
Guidance up despite slow Q2 and adverse weather. Annual average and exit production both have increased by 100 boe/d to 4,850 boe/d and
5,700 boe/d. Despite drilling only four wells in Q2, it maintains an aggressive H2/13 program with three rigs currently running.
Inventory expansion key to thesis and stock performance. We expect additional growth in H2/13 to its current inventory of 1,400 well locations, as the company plans to drill 30 wells in Q2 through Q4 in previously undrilled sections.
Valuation
Raging River currently trades at a 0.9x multiple to CNAV, a 7.1x EV/DACF multiple, and $144,300/BOEPD based on our 2013 estimates.

Novus Energy Trading Alert

We have been waiting for the stock overhang to be removed. The stock could not get up to $ 1.10 because there was always 400- 500,000 shares available below that price.

This despite the company having put itself up for sale with the opening circular of December 17,2012.

Todays New Release helped volume yo overcome the overhang.

Here is the news release:

CALGARY, Jan. 15, 2013 /CNW/ - Novus Energy Inc. (“Novus” or the “Company”) (TSXV: NVS) is pleased to report it has met its corporate exit rate production target of 4,200 boe/d for 2012.

Estimated field level production for the last week of December averaged 4,234 boe/d with approximately 78% of these volumes comprised of oil and liquids. Based on field estimates, average production during December was 3,925 boe/d and fourth quarter 2012 volumes averaged 3,530 boe/d.

During the fourth quarter of 2012, Novus drilled 24 wells (24 net), all of which were Viking horizontal oil wells in the greater Dodsland area.  Throughout 2012, Novus drilled a total of 72 wells (72 net) and completed 68 wells (68 net), all of which were Viking horizontal oil wells in the greater Dodsland area.

During the most recently completed quarter, Novus drilled, completed and placed on production three key successful wells to the west of its Flaxcombe field.  The Company is pleased with the wells’ performance and believe they have the potential to validate a substantial amount of the Company’s land.  The western most well drilled in this successful extension is situated over 12 miles from the Flaxcombe field.  In 2013, Novus has drilled and cased three additional wells in the region and expects to bring them on production during the first quarter.  Novus controls approximately 14.5 sections of land in the region and with continued development success, the Company believes this land block may materially add to its drilling inventory.    Â

Novus now controls 210 net sections of Viking rights in the Greater Dodsland area of Saskatchewan and the Greater Provost area of Alberta.

Value Optimization Process

On December 4, 2012, Novus announced that it had retained Cormark Securities Inc. (“Cormark”), as lead, and FirstEnergy Capital Corp. (“FirstEnergy”) as its financial advisors to assist the Special Committee of the Board of Directors in exploring and evaluating a broad range of options to optimize shareholder value.

The data room is now available for interested and qualified parties who have entered into a confidentiality agreement with Novus. The Company has not established a definitive schedule to complete its review and consideration of options to optimize shareholder value, and does not intend to disclose developments with respect to the process unless and until the Board of Directors has approved a specific transaction or otherwise determines that disclosure is appropriate.

LEVEL 2 with 1.3 million shares traded ( versus an average of less than 500,000 a day.

Level 2 Quote

r Shares Bid Price Ask Price Shares
40,500 1.090 1.100 62,300
11,600 1.080 1.110 57,400
37,500 1.070 1.120 50,100
34,600 1.060 1.130 28,000
27,000 1.050 1.140 26,000
32,200 1.040 1.150 35,800
51,000 1.030 1.160 1,200
172,300 1.020 1.190 28,400
9,000 1.010 1.200 24,600
62,500 1.000 1.210 11,000

Novus Energy Update from CIBC

Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce (Photo credit: Wikipedia)

Nov. 2

Novus Energy

NVS  $ 0.87

CIBC – analysts Grayfur and Fong —  88 pages of facts and fiqures focus on Dodsland and Viking plays in Sask., Canada

The small play that doesn’t get the exposure it might deserve.  For Novus this is a n 85 % of current production (Viking in Saskatchewan ) and ~98% of 2012 capital spending has been focused on the company’s Saskatchewan Viking lands.

Novus is focused primarily on the Viking in the Flaxcombe sub-area, where the company’s wells have shown strong productivity. The company controls 124 sections of Viking Rights in the greater Dodsland area and has ~280 locations booked. In our NAV analysis, we estimate the risked unbooked inventory for the company’s Dodsland inventory to be ~411 wells, which translate to ~$120 million or $0.62/share in Risked value.

On an unrisked basis, we estimate the unbooked inventory to be 970 wells, which is $266 million or $1.38/share in Unrisked NAV.”

Novus Eenrgy : CEO On Takeover Talk

viking

viking (Photo credit: What What)

Hugh Ross CEO and guiding force at Novus Eenrgy ( NVS) – lot of miles over the last while from speaking at conferences to getting the story out. These days in the oil and gas patch just like the resource world anywhere, you have to put in two or three times the number of miles it seems, to attract half the interest.

Oct 22  NVS  .88 

Again, the junior resource sector is not what it used to be with so many people desperate for yield (of any kind) and discovering things like bonds and preferred shares. Stuff they would have never looked at before.

There has been lots of gossip about Novus Energy as a potential take-over target and rumors of course that they’ve already turned down a couple of bids this year, but we suspect as we get into the winter where natural gas will be attracting attention one hopes, maybe Novus will attract something.

As far as the potential of takeovers, Ross answers, “lots of calls” so he is suggesting maybe there is some interest out there. He suggests that if somebody should write a big cheque he and his shareholders would be just as happy as those with Celtic.

As far as the attractiveness on Novus, he points to some of the lowest cost operations in the Viking area and an incredibly high success rate in their drilling operations on the Viking. He points out again, for those who have forgotten, that they are growing their production the old fashioned way…through the drill bit.

As far as who might be a buyer of the company down the road, he points out the names of the biggest companies in the Viking area and they are companies you have heard of…such as Penn West, Crescent Point, Husky and lately companies like Talisman have also become interested as well as Cenovus.

 

Novus Energy Update – Production and Land Assets Increase

English: A picture of a mud log in process. Mu...

English: A picture of a mud log in process. Mud logging is the process of recording the lithology a rotary drill penetrates, typically used in oil well drilling. (Photo credit: Wikipedia)

Aug 14

Novus Energy Inc.  (TSXV: NVS) announces that it has filed its unaudited condensed interim financial statements and management’s discussion and analysis (“MD&A“) as at and for the three and six months ended June 30, 2012. These may be accessed through the SEDAR website http://www.sedar.com and at the Company’s website http://www.novusenergy.ca.

The 2012 Viking oil drilling program continues to progress on schedule.  The Company has drilled, with 100% success, 34 Viking oil wells in the Dodsland area of Saskatchewan, with 26 completed thus far.  Corporate production should exceed 3,300 boe/d within the next ten days as newly completed wells are placed on stream. Production will steadily increase through the balance of the year as additional wells are drilled and placed on stream.

In addition to the 124 net sections of Viking rights the Company holds in the Dodsland area of Saskatchewan, Novus has recently amassed 46 net sections of crown lands prospective for Viking oil in the Provost area of Alberta, on trend with the Company’s existing Dodsland assets.  The lands the Company has acquired are proximate to historical vertical Viking oil production and recent successful horizontal drilling activity on both sides of the Alberta/Saskatchewan border targeting Viking oil.  Novus believes the assembled acreage meaningfully increases the Company’s future drilling and development inventory.  Drilling on these lands is planned for early 2013.

FINANCIAL HIGHLIGHTS

  • Production revenue for the three months ended June 30, 2012, increased 102% to $16.74 million from $8.29 million recorded in the comparative period of 2011. For the six months ended June 30, 2012, production revenue increased 106% to $35.28 million from $17.16 million recorded in the comparative period of 2011.
  • Funds flow from operations for the three months ended June 30, 2012, increased 192% to $8.58 million from $2.94 million recorded in the comparative period of 2011.  For the six months ended June 30, 2012, funds flow from operations increased 213% to $19.24 million from $6.15 million recorded in the comparative period of 2011.
  • Net income for the three months ended June 30, 2012, was $1.09 million versus a loss of $760 thousand recorded in the comparative period of 2011.  For the six months ended June 30, 2012, net income was $3.93 million versus a loss of $2.09 million recorded in the comparative period of 2011.
  • Net capital expenditures for the three months ended June 30, 2012, were $17.08 million versus $18.13 million recorded in the comparative period of 2011.  For the six months ended June 30, 2012, net capital expenditures were $35.21 million versus $30.38 million recorded in the comparative period of 2011.
  • At June 30, 2012, the Company had net debt of $48.29 million.
  • At June 30, 2012 the Company had estimated tax pools of $240.42 million.
  • Corporate operating netbacks for the three months ended June 30, 2012, increased 5% to $41.95/boe from $40.12/boe recorded in the comparative period of 2011.  For the six months ended June 30, 2012, corporate operating netbacks increased 27% to $46.71/boe from $36.90/boe recorded in the comparative period of 2011.
  • Viking operating netbacks for the three months ended June 30, 2012, decreased 16% to $50.68/boe from $60.61/boe recorded in the comparative period of 2011.  For the six months ended June 30, 2012, Viking operating netbacks decreased 12% to $56.54/boe from $64.49/boe recorded in the comparative period of 2011

Novus Energy : CEO Interview / Update

English: This graph shows the development of o...

English: This graph shows the development of oil prices (Brent) over the past 10 years in Dollars and in Euros. The difference is caused by the weakening of the dollar relative to the euro. (Photo credit: Wikipedia)

 

 

Novus Energy ( NVS.v  Vancouver )   $ .69

July 25

Typical Junior Oil Story – Great Potential / Short Term Pain

( Hugh Ross President )

DP: When we go back to the good days of April, we see a report by TD Securities on Novus giving you an asset value of as much as $2.26 to $3.75 a share. With the difference in oil and gas prices, on the Viking play – which is your bread and butter, have the economics changed dramatically?

HR: The Viking play that we are in, is probably one of the top three most economic plays in Canada. We have a very large undeveloped land base in a large scale light oil resource play. We have grown this play organically with highly attractive economics. You saw last year we grew our production by 77% and grew our proved plus probable reserves by 58%. We also have discovered petroleum initially in place of over 644 million barrels on company controlled
lands with industry leading operating netbacks of $63/boe in our Viking oil play.

We continue to have industry leading on stream costs of just over $900,000.00 per well. As we have witnessed in the last two months oil prices
have fallen by approximately 10% to 15%, this will obviously impact our netbacks, however, we will still be top quartile compared to all of our peers. We have a recycle ratio in the Viking over 3 times and we are adding production at costs under $20,000.00 per barrel.
DP: Many people considering your Viking operation almost a manufacturing business in that there doesn’t seem to
be too many surprises. Any changes in what you expect production numbers to be for this year and exit rate?
HR: It was a little bit of a wet spring David in Saskatchewan. Saskatchewan got a huge abundance of rain in May
and June, so we were slightly hampered getting out into field. I would estimate we are behind a couple of weeks of
drilling time, which may have an effect of slightly reducing our overall average production numbers. We guided this
year for 3300 barrels a day as an average so we might be slightly underneath that guidance. But I don’t think we are
going to see much of a change from our exit rate which we guided to 4500 barrels. I will have better color on that in
the next couple of weeks as we are starting to complete an awful lot of wells as we speak. The Viking play is a
manufacturing play for us as we have drilled nearly 120 wells today in the play. We are one of the most active drillers
in the entire play; we have yet to drill a dry hole David.
DP: Your stock pick that last time we did an interview with you was Pinecrest Energy (PRY) and it’s been clobbered
like everyone else in the oil and gas business. Any thoughts on their economics and what next for them?
HR: No I don’t think my view on them has changed. They have been picked on like all of the other junior oils, but I
think they have a pretty strong fundamental play.

FINANCIAL HIGHLIGHTS

  • For the three months ended March 31, 2012 , Novus’ gross revenue increased 109% to $18.54 million from $8.87 million recorded in the comparative period in 2011.
  • Funds flow  from operations increased 232% to $10.66 million in the first quarter of 2012, versus $3.21 million for the comparative three month period of 2011.
  • Net income for the three months ended March 31, 2012 , was $2.84 million , versus a loss of $1.33 million in the comparative three month period of 2011.
  • Novus’ net capital program for the three months ended March 31, 2012 , increased 51% to $18.13 million from $12.00 million in the comparative period of 2011.
  • At March 31, 2012 , the Company had net debt of $39.13 million and currently has credit facilities in place of $65 million .

Novus Energy – Update – Takeover Target

Novus Energy* (NVS : TSX-V : $0.79)  UPDATE

 

Production = Takeover Target

 

Novus released its Q1/12 financial and operational results .

Production of 2,745 boe/d and cash flow per share ( CFPS) met consensus of $0.06.

The higher production was attributed to continued success at Flaxcombe where average well results continue to track ahead of expectations. This area will remain the focus for NVS for the remainder of the year. 2012 average and exit production guidance of 3,300 boe/d and 4,500 boe/d, respectively (85%

liquids), were unchanged.

NVS announced a credit facility increase to $65 million (previously $60 million). This is positive given the current market environment coupled with an expectation for a second facility review to be conducted later this year. NVS remains well financed for its $81 million capital program: current net debt is <$40 million, and, by  estimates, the company exits 2012 with net debt to cash flow at 1.4 times versus peer average of 2.1x.

 Breakup is largely over and NVS is now back in the field drilling, with two rigs currently running through the end of June to ensure it completes its planned 73 Viking well program. NVS remains one of AMP’s top pick amongst the junior energy coverage universe. 

 The company is an attractive takeout candidate given its valuation discount, pure play status in the Viking, and attractive land base and opportunity set.

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