Monday, October 22, 2012

Up and Coming Natural Gas Companies Progress Energy (PRQ) Tourmaline Oil Corp (tse:TOU) Paramount Resources (POU) Intermediate


                  Over the last two years these rapidly growing companies (five billion dollar Tourmaline Oil Corp is only 4 years old !) weathered the steep decline in natural gas prices, which is quite impressive to say the least;  2012 first half revenues at Tourmaline (+32% --> $204 million), Paramount Resources (-6.2% --> $101 million) and Progress Energy (-12% --> $103 million) all stable despite the huge drop in natural gas price realized: Tourmaline -46.2% Paramount -43.2% Progress -33.5%.  What's more, these companies were able to attract the investment (Progress received $1.1 billion from Petronas) necessary to maintain capex spending (-3% Paramount, -22% Tourmaline) at a time when Canada's biggest player, Encana divested $2.2 billion in assets and lowered its 2011 investment plan by -37%. 

Yes, the federal government's ruling against the takeover of Progress Energy by Petronas complicates things for investors;  for many intermediate gas producers cash flow lags capital, making outside cash (investment) essential for asset development to continue, but I wouldn't be too concerned.  Cash flow will experience a natural rise over the coming quarters because natural gas prices are on the way up !  +73% in just the last six months. 
Also to consider:  These companies may be takeover targets but that doesn't mean they're not pursuing their own takeovers;   Paramount Resources:  7.032 /12.928 million boe in 2P reserves that the company added to its stockpile in 2011 came from acquisitions (Prospex Resources Ltd on May 31, 2011).

Tread with caution:  If the takeover is by a foreign company and the deal is deemed not to be in Canada's interest then it won't receive government approval, meaning that any boost in share price related to the takeover would be lost the next trading day, setting the investor up for a big loss; Exxon bids for Celtic Exploration --> stock gains +45% on the day.
 
 

                Paramount Resources


Between January and December 2011 Paramount Resources increased its proved reserves base by 10.090 million barrels of oil equivalent (+39.45%). Total proved plus probable reserves up 32.25% or +12.928 million boe.

Tourmaline Oil Corp

 
Alberta Deep Basin -- 4 drilling rigs (3 horizontal 1 vertical).  During the half there were five new gas wells drilled.  In September 2012 the Musreau gas plant capacity doubled, from 25 --> 50 mmcf/d.
Sunrise-Dawson, BC -- 60 mmcf/d production;  new 50 mmcf/d gas plant opened during 1Q2013 will increase production to :  Gas - 130 mmcf/d  Oil - 5000 bpd.
Spirit River, Alberta -- production @3200 bpd light oil, 14 mmcf/d natural gas.
Positives:  Last quarter (2q2012) : Total Debt down -5.1% to $421.576 million.  Produced 51,022 boe/d (+81% vs 2011) at a total cost of $8.64/boe (-16% vs 2011).  Oil liquids production - 6560 bpd (+119%) which is expected to go up to 9,000 -> 10,000 bpd by 2012 year end.
Negatives:  Pays no dividend.  2012 first half capex (-22%) and earnings (-78%) down.

Progress Energy Resources Corp


Progress Energy leads all companies in terms of land acreage in the Montney region (~800,000 net acres, 625,000 of which is in the North Montney Footholds of NE British Columbia).  Lower natural gas prices forced the company to delay completion of selected wells (announced February 2012).  In the Deep Basin light oil region of NW Alberta the company has 4.5 net wells (6 gross);  The region is also known as the Dunvegan oil play (1800 boe/d production 75% liquids).  The $116 million in capex (1Q2012) came from drilling and completions (74.6% or $86.508m), equipping and facilities (15.7% or $18.176m), land acquisitions (5.8% or $6.724m).  Progress Energy pays a quarterly dividend of 10 cents (unchanged).  Total debt is at $421.576 million which is down -5.1%.

Petronas bid blocked by the government but Progress Energy stock (prq) only gives up a fraction of its gains :  Progress Energy reaped a lot of rewards due to takeover talk, on June 28, 2012 the stock gained 73.6% (11.55 --> 20.05) after Malaysia's state owned oil company Petronas bid $5.5 billion or $20.45 a share for the company.  About a month later, on word of there being a bidding war for the company between Petronas and a mystery bidder, the stock climbed another 13.8% to $22.85 (Petronas responded by increasing its bid by $500 million).  In the ensuing months, the price remained relatively steady at above $20;  While the federal government was contemplating the deal the stock lost $0.93 or 4.1% of its value.  In October, the government put a stop to the deal and on the following trading day Progress Energy Resources loses over 9% of its value, finishing near $19 a share which is encouraging given that prior to Petronas' bids the company was valued at over $11 a share. 

There are two reasons for this 1)  Petronas is state owned, making it subject to extra scrutiny (publicly traded Exxon Mobil didn't face any obstacles when it acquired Celtic Exploration last week).  That means other bidders may succeed and there will be other bidders given the global appetite for natural gas.  Other companies have shown interest in Progress Energy including a mystery bidder on July 26.  2)  2011/2012 net proved plus probable researves up by 67.163 million boe (+30.9%) (though crude oil was down marginally), revenue down only -12% even though natural gas prices plummeted (realized price -33.5% --> $2.56).  Natural gas prices are already higher and the company's financial statements will benefit from that.

Other interesting stocks..

Alimentation Couche Tard Inc (PINK:ANCUF) +64% last 12 months - Convenience store/gas bar operator in Quebec. Company is growing fast (over last year reached the same market capitalization as Canada's largest supermarket operator, Loblaw Companies).  This must be a good investment !  Metro Inc, Canada's #3 supermarket operator, paid over $23.6 million just to maintain its share in Couche Tard at 10.6%.

Galaxy Resources (ASX:GXY) -  Australia-based resource company with assets containing lithium and potash.  Recently acquired Canada's Lithium One and its vast reserves at Argentina's Sal de Vida project - annual production will be 25th tons lithium, 107th tons potash.
Pembina Pipeline (NYSE:PBA) - Thanks in part to the April 2012 acquisition of Provident Energy ($3 billion) the company has a market value three times greater than it did last year.  Has extensive oil transportation infrastructure from pipelines to trucking.

Oil and Gas Reserves



 
Progress Energy Paramount Resources Tourmaline Corp
   
Gross
Net
Gross
Gross
Net
Jan 2012 N.Gas
bcf
Proved
996.79
887.378
162.0
782.457
700.071
2P
1718.179
1521.726
244.1
1415.942
1264.505
Crude oil
Mbbls
Proved
4.371
3.773
4.874
6.254
4.734
2P
6.064
5.154
6.573
10.931
8.254
Gas liq
Mboe
Proved
18.432
15.401
3.799
12.186
9.348
2P
30.963
25.714
5760
22.876
17.515
Total
Mboe
Proved
188.934
167.070
35.667
148.849
130.761
2P
323.391
284.489
53.015
269.797
236.520
Jan 2011 N.Gas
bcf
Proved
821.289
707.429
112.0
487.093
438.407
2P
1365.581
1178.303
181.8
829.365
746.357
Crude oil
Mbbls
Proved
4.761
4.082
6.906
3.870
3.004
2P
6.242
5.316
9.782
6.479
5.000
Gas liq
Mboe
Proved
12.103
9.566
incl
7.962
6.207
2P
19.573
15.626
incl
13.474
10.470
Total
Mboe
Proved
153.746
131.553
25.576
93.015
82.279
2P
253.412
217.326
40.087
158.181
139.863



Key Metrics: Progressive Energy, Tourmaline Oil Corp, Paramount Resources


USD mil Financials Production Real.Price $
000 bpd mmcf/d Revenue Profit Capex Assets Gas Oil liq total boe Gas Oil Gas.liq
Progress Energy 1Q2012 103.014 (6.81) 116.003 2,655.748 239,376 2374 4496 46,766 2.56 92.94 66.21
1Q2011 117.115 1.60 140.191 2,458.390 233,488 2033 3408 44,356 3.85 82.89 67.85
chg % (12.04)% (93.3)% (58.6)% 8.0% 75.9% 119.3% 8.0% 80.5% (33.5)% 12.1 (2.4)%
Tourmaline Corp 2Q2012 100.461 1.012 53.831 266,771 6560 incl 51,022 2.23 77.75 incl
2Q2011 86.433 15.192 130.075 151,634 2991 incl 28,263 4.38 95.54 incl
chg % 16.2 (93.3)% (58.6)% 75.9% 119.3% 80.5% (49.1)% (18.6)%
1H2012 204.599 3988 270.255 2,862.502 256,631 6112 incl 48,884 2.38 84.11 incl
1H2011 154.980 17,919 347.627 2,030.285 138,576 2703 incl 25,799 4.42 89.96 incl
chg % 32.0% (77.7)% (22.3)% 40.99% 85.19% 126.1% 89.5% (46.2)% (6.5)%%
Paramount Resources 2Q2012 46.5 nil 66.4 1,777.300 106,200 1808 1973 21,474 2.09 78.65 69.63
2Q2011 61.1 12.2 54.5 1,714.500 77,700 2110 1504 16,572 4.36 94.58 81.95
chg % (23.9)% growth 21.8% 3.7% 36.7% (14.3)% 31.2% 29.6% (52.1)% (16.8)%% (15.0)%
1H2012 101.20 124.50 208.60 97,400 2097 1813 20,144 2.40 73.71 84.66
1H2011 107.90 0.30 214.60 68,300 2231 1237 14,844 4.26 79.47 87.65
chg % (6.2)% growth (2.8)% 42.6% 6.0% 46.6 35.7% (43.7)% (7.2)%% (3.4)%

1 comment:

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