Energy Prospectus

Vero Energy (VRO.TO) 3rd quarter production was slightly below my forecast on a boe basis, however with more liquids their revenues came in higher than my forecast. They are on-track to generate over $1.20 cash flow per share this year and it could push over $2/share next year. This is one very cheap stock! - Dan

As a percentage of corporate production, liquids (oil and natural gas liquids) accounted for 24% of total production in the third quarter of 2011. Given the strong prices realized for Vero's oil and high quality NGL production, aggregate liquids revenue accounted for approximately 51% of total revenue during the third quarter. Total production increased by 11% over the third quarter of 2010 to average 9,262 boe/d. For the year to date daily production was 9% higher at 9,344 boe/d from 8,583 in 2010. The increase in aggregate production levels accompanied by the increased contribution from the higher priced liquids production, delivered funds flow for the third quarter of $15.1 million. This translated into $0.31 per share on both a basic and diluted per share basis.

I will have an updated forecast up on the website (Watch List Tab) within the hour.

CIBC on VERO:

Vero Energy Inc.
Q3/11 Below Expectations; Downward Revision To Guidance

Ticker: VRO-TSX

Stock Rating: Sector Performer

Price (11/14/2011): $2.84

Vero Energy (VRO-SP) reported Q3/11 results that were below expectations.
Production was 9,262 Boe/d (76% gas), which was lower than our 10,410
Boe/d estimate. The production miss was attributed to field delays,
turnarounds and one Notikewin well experiencing drilling difficulties (that has
not yet been tied in). Operating costs were $8.58/Boe, in line with our
$8.50/Boe estimate, but royalty costs, at $5.45/Boe, were higher than our
estimate of $4.16/Boe due to new wells with gross overriding royalties and
certain wells exceeding their 5% new well royalty rate. As a result, cash flow
per share was $0.31, below our estimate of $0.39 and Street consensus of
$0.38.

Due to higher services costs coupled with lower gas prices, Vero has decided
to focus on Cardium oil drilling for the remainder of the year. With this focus
on lower relative oil volumes, as well as lower-than-expected current
production of 9,600 Boe/d, 2011 production guidance has been revised
downward to 9,200 Boe/d-9,400 Boe/d (from 10,000 Boe/d-10,500 Boe/d
previously). 2011 capex is expected to be $120MM-$125 MM (up from
$100MM previously).

In Q3, Vero spent $32.2MM, drilling seven (5.7 net) horizontal wells: five (4.1
net) were Cardium oil wells, one (0.6 net) was a Wilrich gas well and one
(0.97 net) was a Notikewin well. Currently, one Cardium and two Notikewin
gas wells are drilling. As indicated, no additional gas locations are expected to
be drilled in Q4/11; four (2.7 net) further Cardium oil wells are planned, with
potentially 0.7-1.0 net non-operated Cardium wells.

At this time, Vero has no plans to spend capital in 2012 in its 50 net sections
of prospective Duvernay lands. Vero will release next year's guidance in early
2012.

Dan,
On the Vero update on the watch list I noticed the value of the company was reduced from $9. to $7.5. Would you please comment on the cause of this revision. At $2.5 the stock looks very cheap but it appears they are spending more capital to get less production than anticipated? Thank you