Petrobakken Results
Petrobakken Results
Petrobakken (PBN.TO) posted Q4 and 2011 results slightly above Dan's projections of 1/13/12. PBN is currently selling at 4 times cash flow or FFO. At 4 times Dan's forecast cash flow for 2012, the price would be up 25%. Add in the 6% dividend, paid monthly, and PBN looks pretty good for 2012. Moreover, there is room for an increase in the P/CF multiple, which could raise returns. I'm very comfortable with an overweight position in PBN, wondering if I should go to double weight.
Re: Petrobakken Results
Take a hard look at what PetroBakken has going in the Cardium. They have a lot of upside in that play. Vero Energy (VRO.TO) is their partner in several wells. IMO VRO should be a double within 12 months.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Petrobakken Results
I will update the forecast models for PetroBakken, PetroBank and Petrominerales this weekend. My focus this week has been on getting all Sweet 16 forecasts and profiles updated for Q4 results and new guidance.
All of the Sweet 16 have rock solid fundamentals. All have reported outstanding 4th quarter results and Q1 should be even better.
All of the Sweet 16 have rock solid fundamentals. All have reported outstanding 4th quarter results and Q1 should be even better.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Petrobakken Results
BMO on PBN:
PetroBakken Energy – (PBN) - $16.40, up $1.36 – Analyst – Jim Byrne – Market Perform – TP $15.00 - PetroBakken reported 2011 CFPS of $3.75, above Jim’s estimate of $3.57. Production for the fourth quarter averaged 48,007 boe/d, slightly below his 48,542 boe/d estimate. Operating netbacks of ~$59.25/boe were above his estimate of ~$51.50/boe largely owing to a combination of higher-than-expected liquids weighting and lower-than-expected operating costs. An impairment charge of $50 million was recognized owing to low gas prices and a lack of development in the company’s NE BC gas assets. During the fourth quarter, PetroBakken drilled 54 net wells and brought on production an additional 85 net wells. The company indicated that February production averaged in excess of 49,000 boe/d (before dispositions of ~2,900 boe/d), down from the company’s 2011 exit rate of ~50,000 boe/d. As expected, PetroBakken has increased its 2012 capital budget by $175 million or 25% to $875 million (~$345 million net of dispositions), below 2011 spending of ~$970 million (before dispositions). As a result, the company is increasing its 2012 exit production rate to a range of 52,000-56,000 boe/d from its previous guidance of 50,000-54,000 boe/d. At the midpoint of this range, this represents a 4% increase over prior guidance as originally announced in December. Jim’s CFPS estimate for 2012 moves up to $3.48 from $3.46. His current outlook calls for average production of 47,524 boe/d in 2012, representing a 16% growth rate year-over-year. Jim is maintaining his Market Perform rating and target of $15.00. At 6.3x 2012E debt-adjusted CFPS and a 6.6x 2012E EV/EBITDA multiple, PetroBakken trades below its oil-weighted peer medians of 7.2x and 7.5x, respectively. Overall, he remains cautious until the company can demonstrate its ability to consistently meet production and capital spending guidance. While management has done a significant job in turning the PetroBakken story around and continued oil price strength is very supportive of the company’s cash flow, Jim believes the shares are fairly valued at these levels.
PetroBakken Energy – (PBN) - $16.40, up $1.36 – Analyst – Jim Byrne – Market Perform – TP $15.00 - PetroBakken reported 2011 CFPS of $3.75, above Jim’s estimate of $3.57. Production for the fourth quarter averaged 48,007 boe/d, slightly below his 48,542 boe/d estimate. Operating netbacks of ~$59.25/boe were above his estimate of ~$51.50/boe largely owing to a combination of higher-than-expected liquids weighting and lower-than-expected operating costs. An impairment charge of $50 million was recognized owing to low gas prices and a lack of development in the company’s NE BC gas assets. During the fourth quarter, PetroBakken drilled 54 net wells and brought on production an additional 85 net wells. The company indicated that February production averaged in excess of 49,000 boe/d (before dispositions of ~2,900 boe/d), down from the company’s 2011 exit rate of ~50,000 boe/d. As expected, PetroBakken has increased its 2012 capital budget by $175 million or 25% to $875 million (~$345 million net of dispositions), below 2011 spending of ~$970 million (before dispositions). As a result, the company is increasing its 2012 exit production rate to a range of 52,000-56,000 boe/d from its previous guidance of 50,000-54,000 boe/d. At the midpoint of this range, this represents a 4% increase over prior guidance as originally announced in December. Jim’s CFPS estimate for 2012 moves up to $3.48 from $3.46. His current outlook calls for average production of 47,524 boe/d in 2012, representing a 16% growth rate year-over-year. Jim is maintaining his Market Perform rating and target of $15.00. At 6.3x 2012E debt-adjusted CFPS and a 6.6x 2012E EV/EBITDA multiple, PetroBakken trades below its oil-weighted peer medians of 7.2x and 7.5x, respectively. Overall, he remains cautious until the company can demonstrate its ability to consistently meet production and capital spending guidance. While management has done a significant job in turning the PetroBakken story around and continued oil price strength is very supportive of the company’s cash flow, Jim believes the shares are fairly valued at these levels.
Re: Petrobakken Results
CIBC on PBN:
PetroBakken Energy Ltd.
Strong Q4; Increased Guidance Strengthens Growth Outlook; Top Pick Today
Q4 Beats On Cash Flow; Increased Guidance Strengthens Growth Outlook
PetroBakken (PBN-SO) reported fourth-quarter results yesterday that were in line on production but above expectations on cash flow. Actual Q4 production of 48,007 Boe/d was pre-announced (in tandem with reserves on February 27) and in line with our estimate, while reported Q4 cash flow of $1.24/share was 8% above our estimate of $1.15/share and 14% above consensus of $1.09/share. Variance to our cash flow estimate is was primarily due to lower-than-expected operating costs, which fell to $10.97/Boe in Q4 versus $13.13/Boe in the previous quarter. We note that production for the full month of December averaged 50,250 Boe/d, well above PetroBakken’s 2011 exit guidance range of 46,000 Boe/d-49,000 Boe/d.
In tandem with Q4 results, PetroBakken announced a $175MM increase in 2012 spending (to $875MM) and a 2,000 Boe/d increase in its 2012 exit rate guidance to 52,000 Boe/d-56,000 Boe/d (up from 50,000 Boe/d-54,000 Boe/d). The increase in guidance comes despite Q1 dispositions of 2,900 Boe/d in the Bakken for $427MM ($147,250/Boepd) and 580 Boe/d in Weyburn for $105MM ($180,000/Boepd). If we account for this disposed production, PetroBakken’s increase in production guidance could be interpreted to total 5,480 Boe/d (net of dispositions) with the $175MM spending increase equating to a per flowing barrel metric of ~$32,000/Boepd for the additions (very attractive compared to PetroBakken’s asset sale metrics). Increased spending will primarily be allocated to the Cardium.
PetroBakken had capital spending of ~$274MM in Q4/11, drilling 82 gross (53.9 net) wells with a 100% success rate, and bringing 129 gross (84.7 net wells) on production. In the full-year 2011, the company spent ~$961MM, drilling ~206 net wells. In the Bakken, current production is in excess of 21,250 Boe/d (prior to the pending 2,900 Boe/d disposition), while in the Cardium, current production stands at 17,750 Boe/d. Since the end of the quarter, PetroBakken has drilled an additional 48 (33 net) wells, completed 55 (44 net) wells, and brought 28 (19 net) wells on production, and has 11 rigs currently operating (6 in southeast Saskatchewan, and 5 in the Cardium). In the company’s Alberta/B.C. business unit (where PetroBakken has 120,000 net acres), the company drilled 4 HZ test wells in 2011 to evaluate the Nordegg, Montney, and the Duvernay, and plans to test its Swan Hills play in the second half of 2012.
We note that we now consider PetroBakken’s balance sheet to be repaired, with over $1.1 billion of room on its recently expanded $1.5 billion credit line and a reasonable 2012 D/CF ratio of 1.6x (versus the group average of 2.0x) under current forward strip prices. In addition to its $532MM of asset sales in Q1, the company also completed a private placement of US$900MM of senior notes (8.65% coupon) and used a portion of the proceeds to repurchase US$450MM of its convertible debentures. The senior notes issuance gave PetroBakken considerable financial flexibility and addressed concerns over the one-time put option its convertible debenture holders had in February 2013.
In light of increased spending and guidance, we have increased our 2012 and 2013 production forecasts for PetroBakken by 2% and 4% to 49,000 Boe/d and 52,750 Boe/d, respectively (from 48,200 Boe/d and 50,600 Boe/d, respectively). After fine-tuning our financial model, our cash flow forecasts for 2012 and 2013 increase by 4% and 8% to $4.72/share and $5.00/share, respectively (from $4.54/share and $4.62/share, respectively). PetroBakken has a reasonable balance sheet with an estimated 2012 total debt to cash flow ratio of 1.6x (versus the group average of 2.0x) under forward strip prices and with only 20% of its $1.5 billion credit facility currently drawn (versus the group average of 36%). We estimate a total payout ratio for PetroBakken of 118% in 2012, roughly in line with our group average total payout ratio of 120%.
Increasing Price Target; Remains Our Top Pick
We are maintaining our Sector Outperformer rating and increasing our price target to $24 (from $23). Our price target remains based on a discounted 0.8x target multiple to our Risked NAV (versus the group average target multiple of 1.0x). We believe shares of PetroBakken represent compelling value at current levels, given the company’s repaired balance sheet and strong per share production growth in 2012 (18% versus the 8% for the group). The company trades at a 2012E EV/DACF multiple of 4.8x and a P/Risked NAV of 53% (versus the group averages of 7.7x and 71%, respectively), while providing investors with a current cash yield of 5.9% (versus the group average of 5.3%).
PetroBakken Energy Ltd.
Strong Q4; Increased Guidance Strengthens Growth Outlook; Top Pick Today
Q4 Beats On Cash Flow; Increased Guidance Strengthens Growth Outlook
PetroBakken (PBN-SO) reported fourth-quarter results yesterday that were in line on production but above expectations on cash flow. Actual Q4 production of 48,007 Boe/d was pre-announced (in tandem with reserves on February 27) and in line with our estimate, while reported Q4 cash flow of $1.24/share was 8% above our estimate of $1.15/share and 14% above consensus of $1.09/share. Variance to our cash flow estimate is was primarily due to lower-than-expected operating costs, which fell to $10.97/Boe in Q4 versus $13.13/Boe in the previous quarter. We note that production for the full month of December averaged 50,250 Boe/d, well above PetroBakken’s 2011 exit guidance range of 46,000 Boe/d-49,000 Boe/d.
In tandem with Q4 results, PetroBakken announced a $175MM increase in 2012 spending (to $875MM) and a 2,000 Boe/d increase in its 2012 exit rate guidance to 52,000 Boe/d-56,000 Boe/d (up from 50,000 Boe/d-54,000 Boe/d). The increase in guidance comes despite Q1 dispositions of 2,900 Boe/d in the Bakken for $427MM ($147,250/Boepd) and 580 Boe/d in Weyburn for $105MM ($180,000/Boepd). If we account for this disposed production, PetroBakken’s increase in production guidance could be interpreted to total 5,480 Boe/d (net of dispositions) with the $175MM spending increase equating to a per flowing barrel metric of ~$32,000/Boepd for the additions (very attractive compared to PetroBakken’s asset sale metrics). Increased spending will primarily be allocated to the Cardium.
PetroBakken had capital spending of ~$274MM in Q4/11, drilling 82 gross (53.9 net) wells with a 100% success rate, and bringing 129 gross (84.7 net wells) on production. In the full-year 2011, the company spent ~$961MM, drilling ~206 net wells. In the Bakken, current production is in excess of 21,250 Boe/d (prior to the pending 2,900 Boe/d disposition), while in the Cardium, current production stands at 17,750 Boe/d. Since the end of the quarter, PetroBakken has drilled an additional 48 (33 net) wells, completed 55 (44 net) wells, and brought 28 (19 net) wells on production, and has 11 rigs currently operating (6 in southeast Saskatchewan, and 5 in the Cardium). In the company’s Alberta/B.C. business unit (where PetroBakken has 120,000 net acres), the company drilled 4 HZ test wells in 2011 to evaluate the Nordegg, Montney, and the Duvernay, and plans to test its Swan Hills play in the second half of 2012.
We note that we now consider PetroBakken’s balance sheet to be repaired, with over $1.1 billion of room on its recently expanded $1.5 billion credit line and a reasonable 2012 D/CF ratio of 1.6x (versus the group average of 2.0x) under current forward strip prices. In addition to its $532MM of asset sales in Q1, the company also completed a private placement of US$900MM of senior notes (8.65% coupon) and used a portion of the proceeds to repurchase US$450MM of its convertible debentures. The senior notes issuance gave PetroBakken considerable financial flexibility and addressed concerns over the one-time put option its convertible debenture holders had in February 2013.
In light of increased spending and guidance, we have increased our 2012 and 2013 production forecasts for PetroBakken by 2% and 4% to 49,000 Boe/d and 52,750 Boe/d, respectively (from 48,200 Boe/d and 50,600 Boe/d, respectively). After fine-tuning our financial model, our cash flow forecasts for 2012 and 2013 increase by 4% and 8% to $4.72/share and $5.00/share, respectively (from $4.54/share and $4.62/share, respectively). PetroBakken has a reasonable balance sheet with an estimated 2012 total debt to cash flow ratio of 1.6x (versus the group average of 2.0x) under forward strip prices and with only 20% of its $1.5 billion credit facility currently drawn (versus the group average of 36%). We estimate a total payout ratio for PetroBakken of 118% in 2012, roughly in line with our group average total payout ratio of 120%.
Increasing Price Target; Remains Our Top Pick
We are maintaining our Sector Outperformer rating and increasing our price target to $24 (from $23). Our price target remains based on a discounted 0.8x target multiple to our Risked NAV (versus the group average target multiple of 1.0x). We believe shares of PetroBakken represent compelling value at current levels, given the company’s repaired balance sheet and strong per share production growth in 2012 (18% versus the 8% for the group). The company trades at a 2012E EV/DACF multiple of 4.8x and a P/Risked NAV of 53% (versus the group averages of 7.7x and 71%, respectively), while providing investors with a current cash yield of 5.9% (versus the group average of 5.3%).
Re: Petrobakken Results
MACQUARIE on PBN:
PetroBakken Energy
Reserves addition costs as expected;
current production ahead of forecast
Event
Year-end 2011 reserves were reported at 118.9mmboe Proved and 201.9mmboe
P+P. On a per share basis, the company grew its reserves by 17% and 19% YoY,
respectively. All-in P+P FD&A costs of C$30.74/boe including changes in FDC.
PUD bookings increased in the year to 38% from 30% in 2010.
The company reported 4Q11 production of 48,000boe/d, which was in line with
our forecast of 47,500boe/d. Current production of 49,000boe/d is ahead of our
expectations after taking into consideration 1,030boe/d of dispositions.
Impact
Current production – mixed. January production of 47,500boe/d compared to
December average production of 50,000boe/d, which reflected a slow down in
activity versus year-end, flush declines and a 450boe/d disposition. Current
production of 49,000boe/d reflects 1,030boe/d of dispositions and is back to
December levels. As a reminder, December volumes were ahead of our
expectations and company guidance of 46–49,000boe/d. We look for favourable
weather conditions and early indications of a better spring break-up, to help the
company further the operational success that it experienced in 2H11.
2011 reserves growth – positive. PetroBakken demonstrated an improvement in
its reserve addition costs last year and generated a respectable all-in recycle ratio
of 1.7x P+P.
Earnings and target price revision
The changes to our estimates are minor – updated 4Q11 production. We expect
management to update guidance in March and as such we continue to forecast
2012 capex of C$875m, which is well ahead of current guidance of C$700m. Our
current forecast for 2012 production is 46.5mboe/d (up 300boe/d).
We are increasing our target price to C$19.00 (from C$17.50), which is directly in
line with our Core NAV and equates to a 2012 EV/DACF multiple of only 5.4x.
Price catalyst
12-month price target: C$19.00 based on a 5.4x 2012 EV/DACF methodology.
Catalyst: Updated 2012 guidance, exploration drilling results
Action and recommendation
At 4.8x 2012E EV/DACF, PetroBakken trades at the most attractive valuation in
our North American mid-cap, oil-weighted producer (>70% liquids) universe. We
expect the company to experience a material multiple expansion during 2012 but
caution near-term volatility is likely with higher capex guidance in March.
PetroBakken Energy
Reserves addition costs as expected;
current production ahead of forecast
Event
Year-end 2011 reserves were reported at 118.9mmboe Proved and 201.9mmboe
P+P. On a per share basis, the company grew its reserves by 17% and 19% YoY,
respectively. All-in P+P FD&A costs of C$30.74/boe including changes in FDC.
PUD bookings increased in the year to 38% from 30% in 2010.
The company reported 4Q11 production of 48,000boe/d, which was in line with
our forecast of 47,500boe/d. Current production of 49,000boe/d is ahead of our
expectations after taking into consideration 1,030boe/d of dispositions.
Impact
Current production – mixed. January production of 47,500boe/d compared to
December average production of 50,000boe/d, which reflected a slow down in
activity versus year-end, flush declines and a 450boe/d disposition. Current
production of 49,000boe/d reflects 1,030boe/d of dispositions and is back to
December levels. As a reminder, December volumes were ahead of our
expectations and company guidance of 46–49,000boe/d. We look for favourable
weather conditions and early indications of a better spring break-up, to help the
company further the operational success that it experienced in 2H11.
2011 reserves growth – positive. PetroBakken demonstrated an improvement in
its reserve addition costs last year and generated a respectable all-in recycle ratio
of 1.7x P+P.
Earnings and target price revision
The changes to our estimates are minor – updated 4Q11 production. We expect
management to update guidance in March and as such we continue to forecast
2012 capex of C$875m, which is well ahead of current guidance of C$700m. Our
current forecast for 2012 production is 46.5mboe/d (up 300boe/d).
We are increasing our target price to C$19.00 (from C$17.50), which is directly in
line with our Core NAV and equates to a 2012 EV/DACF multiple of only 5.4x.
Price catalyst
12-month price target: C$19.00 based on a 5.4x 2012 EV/DACF methodology.
Catalyst: Updated 2012 guidance, exploration drilling results
Action and recommendation
At 4.8x 2012E EV/DACF, PetroBakken trades at the most attractive valuation in
our North American mid-cap, oil-weighted producer (>70% liquids) universe. We
expect the company to experience a material multiple expansion during 2012 but
caution near-term volatility is likely with higher capex guidance in March.
Re: Petrobakken Results
CANACCORD on PBN:
PETROBAKKEN PETRO-ROCKIN’
Event
PetroBakken reported a Q4/11 cash flow beat this morning on much improved
operating costs (by $0.78 per BOE versus our estimates), and a slightly oilier
production mix relative to our forecasts. The company also announced a material
25% expansion in 2012 capital plans, to $875 million from the prior $700 million.
Quarterly CFPS, f.d. of $1.13 was ahead of our $1.08 estimate and consensus of
$1.08, while quarterly production of 48,007 BOE/d (86.7% oil weighted)
compared well with our 48,000 BOE/d estimate (86.0%). There was a net loss of
$0.01 reported due to a non-cash impairment (related primarily to BC gas assets)
and changes to derivative financial liabilities.
Following the previously disclosed steps taken to improve liquidity (DRIP, senior
notes, dispositions), the company estimates having $1.1 billion available on its
$1.5 billion in credit facilities, and as such, has increased its capital program 25%
to $875 million from $700 million (still below the 2011 gross spend of $967
million). The capital increase has led management to increase its forecast exit
production by 2,000 BOE/d, to a range of 52,000 - 56,000 BOE/d.
Impact
Positive. Management has been working to bring down operating costs, and the
quarter averaged below $11.00 per BOE. This is expected to carry forward and
continue improving through our forecast horizon and is contributing to our
improved cash flow outlook, which has risen 11% in 2013.
Recommendation
We are reiterating our BUY recommendation with a revised 12-month target
price of C$25.50 (from C$24.00), which remains based on a 6.0x 2013E
EV/DACF multiple supplemented by $3.88 in risked Bakken and Cardium upside
potential (from $4.25). The risked upside estimate reduction has resulted from
confirming booked versus unbooked Bakken locations which we did not have
(and mentioned) at the time of our prior release.
PetroBakken currently trades at 4.7x EV/DACF and $90,746 per BOE/d based on
our 2013 estimates, a 51% and 49% discount, respectively, to its closest
competitor. We expect this gap to continue narrowing. PetroBakken is currently
forecast to have the highest return amongst the dividend payers in our coverage
universe (70%) and pays a yield 6.4%.
PETROBAKKEN PETRO-ROCKIN’
Event
PetroBakken reported a Q4/11 cash flow beat this morning on much improved
operating costs (by $0.78 per BOE versus our estimates), and a slightly oilier
production mix relative to our forecasts. The company also announced a material
25% expansion in 2012 capital plans, to $875 million from the prior $700 million.
Quarterly CFPS, f.d. of $1.13 was ahead of our $1.08 estimate and consensus of
$1.08, while quarterly production of 48,007 BOE/d (86.7% oil weighted)
compared well with our 48,000 BOE/d estimate (86.0%). There was a net loss of
$0.01 reported due to a non-cash impairment (related primarily to BC gas assets)
and changes to derivative financial liabilities.
Following the previously disclosed steps taken to improve liquidity (DRIP, senior
notes, dispositions), the company estimates having $1.1 billion available on its
$1.5 billion in credit facilities, and as such, has increased its capital program 25%
to $875 million from $700 million (still below the 2011 gross spend of $967
million). The capital increase has led management to increase its forecast exit
production by 2,000 BOE/d, to a range of 52,000 - 56,000 BOE/d.
Impact
Positive. Management has been working to bring down operating costs, and the
quarter averaged below $11.00 per BOE. This is expected to carry forward and
continue improving through our forecast horizon and is contributing to our
improved cash flow outlook, which has risen 11% in 2013.
Recommendation
We are reiterating our BUY recommendation with a revised 12-month target
price of C$25.50 (from C$24.00), which remains based on a 6.0x 2013E
EV/DACF multiple supplemented by $3.88 in risked Bakken and Cardium upside
potential (from $4.25). The risked upside estimate reduction has resulted from
confirming booked versus unbooked Bakken locations which we did not have
(and mentioned) at the time of our prior release.
PetroBakken currently trades at 4.7x EV/DACF and $90,746 per BOE/d based on
our 2013 estimates, a 51% and 49% discount, respectively, to its closest
competitor. We expect this gap to continue narrowing. PetroBakken is currently
forecast to have the highest return amongst the dividend payers in our coverage
universe (70%) and pays a yield 6.4%.
Re: Petrobakken Results
CREDIT SUISSE on PBN:
Q4 Results: PetroBakken has reported record operating CFPS of C$1.24 for Q4 vs. our C$1.16 estimate and IBES
consensus of C$1.06. Strong operating cash flow was driven by better realized crude pricing and lower operating and
royalty expense. Operating costs showed noticeable improvement from prior difficult quarters and averaged C$10.97/boe
vs. C$13.13/boe in Q3 and C$15.24/boe in Q2. Production averaged 48,007 boe/d (~87% liquids), in line with the
previously estimated 48,000 boe/d (~86% liquids). Mid-February production was above 49,000 boe/d, prior to dispositions.
New Guidance: Following recent debt issuance and asset sales, that have meaningfully improved PetroBakken's financial
position, the company has now chosen to accelerate capital in 2012 by C$175 million, using a portion of sales proceeds.
The majority of additional capital is being directed to the Cardium growth play, with an updated corporate exit target range
of 52,000-56,000 vs. the prior 50,000-54,000 boe/d, net of sold production. While we expect limited impact on an average
basis for 2012, the higher exit rate positions PetroBakken for continued growth into 2013 and comes at a time when other
companies in the sector are cutting back.
Recycle Ratio Improves: PetroBakken recently reported strong 2P reserve growth of 19% for 2011. While all in FD&A costs
(including the change in future development capital) remained high in the ~C$31/boe range, it is now clear to us that the
company's recycle ratio, based on the operating netback, improved from 1.2x in 2010 to 1.8x in 2011. As we forecast
substantial expansion of PetroBakken's operating netback in 2013 at our current assumption of $113/bbl WTI, the recycle
ratio could rise above 2.0x should FD&A costs stabilize.
Valuation: Our C$20 target equates to 4.5x 2013E EBIDAX, a ~30% discount to Canadian mid-cap peers, yet provides total
return potential of 39% vs. 23% for peers. As such, we are maintaining our Outperform rating.
Q4 Results: PetroBakken has reported record operating CFPS of C$1.24 for Q4 vs. our C$1.16 estimate and IBES
consensus of C$1.06. Strong operating cash flow was driven by better realized crude pricing and lower operating and
royalty expense. Operating costs showed noticeable improvement from prior difficult quarters and averaged C$10.97/boe
vs. C$13.13/boe in Q3 and C$15.24/boe in Q2. Production averaged 48,007 boe/d (~87% liquids), in line with the
previously estimated 48,000 boe/d (~86% liquids). Mid-February production was above 49,000 boe/d, prior to dispositions.
New Guidance: Following recent debt issuance and asset sales, that have meaningfully improved PetroBakken's financial
position, the company has now chosen to accelerate capital in 2012 by C$175 million, using a portion of sales proceeds.
The majority of additional capital is being directed to the Cardium growth play, with an updated corporate exit target range
of 52,000-56,000 vs. the prior 50,000-54,000 boe/d, net of sold production. While we expect limited impact on an average
basis for 2012, the higher exit rate positions PetroBakken for continued growth into 2013 and comes at a time when other
companies in the sector are cutting back.
Recycle Ratio Improves: PetroBakken recently reported strong 2P reserve growth of 19% for 2011. While all in FD&A costs
(including the change in future development capital) remained high in the ~C$31/boe range, it is now clear to us that the
company's recycle ratio, based on the operating netback, improved from 1.2x in 2010 to 1.8x in 2011. As we forecast
substantial expansion of PetroBakken's operating netback in 2013 at our current assumption of $113/bbl WTI, the recycle
ratio could rise above 2.0x should FD&A costs stabilize.
Valuation: Our C$20 target equates to 4.5x 2013E EBIDAX, a ~30% discount to Canadian mid-cap peers, yet provides total
return potential of 39% vs. 23% for peers. As such, we are maintaining our Outperform rating.
Re: Petrobakken Results
PetroBakken Energy Raised To Outperform From Sector Perform By RBC
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group