Thursday, December 15, 2011
Canaccord on Petrobakken
Who's the guy on the white horse? PetroBakken swung higher alongside improved oil prices and strong 2012 production guidance. The company announced that production in early December had reached over 48,000 BOE. It also said it expects to end 2011, a 23% increase over Q3/11 production levels. Also with 1,450 BOE shut in awaiting tie-in, the company expects to meet its targeted 2011 exit rate of over 49,000 boepd. For 2012, PetroBakken announced a $700-million capital program that will see over 240 horizontal well bores drilled (including bilaterals) to achieve production per share growth of 15% and a 2012 exit rate of 50,000-54,000 BOE/d. Canaccord Genuity Oil & Gas Analyst Brian Kristjansen had forecast $600 million to give production per share growth of 12.9%, although with a lower exit. The company also indicated it was implementing a DRIP, offering a 5% discount on share price for those who reinvest. The company's DRIP program will see PetroBank Energy (PBG) shareholders (who own 59% of PetroBakken) commit to 50% participation. Assuming an average participation rate of 30% amongst the remaining shareholders, Kristjansen expects this to reduce the cash burden of the company's dividend by approximately $75 million in 2012. He see this is as the first step in improving liquidity in advance of February 2013 where up to $750 million in convertible debentures can be put back to the company. He also believes the company's banking syndicate will look favourably upon the DRIP and we could expect a bank line increase in the near-future. Also of note, Brett Wilson, FirstEnergy Capital Corp. co-founder, has been appointed as a director. Kristjansen recently picked up (speculative) bullish coverage on the stock based on its enviable assets in top resource play, high light-oil weighting delivers industry leading netbacks and leverage concerns have beaten the share price to attractive levels.