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PetroBakken Energy (Photo credit: Wikipedia)
PetroBakken Energy Ltd.
PBN : TSX : C$13.11 Buy , Target C$19.50
August 10
• Quiet Q2 holds few surprises; reiterating BUY and Target to C$19.50
Event
PetroBakken reported Q2/12 results yesterday, with in line production of 38,715 BOE/d (the company pre-announced field estimates on July 9) with associated CFPS, f.d. of $0.62 relative to our $0.64 latest Bloomberg consensus of $0.66. The $0.02 difference in our estimate related to a 1% gassier production mix and higher operating costs.
We expect operating costs to fall back in H2/12 as production ramps and to stay lower in 2013 post-planned infrastructure buildout. July production is quoted at 38,250 BOE/d with production weighted to H2/12 as a result of 27 net wells awaiting completion or tie-ins and 14 rigs operating in the Bakken and Cardium.
Q2/12 activity was characteristically quiet, with only 9 net wells drilled in the quarter. Instead, the headline items included a $61 million non-cash impairment charge relating to the expiry of 45 net sections of Horn River acreage (the remaining land has tenure, though the company is in no hurry to spend money on gas prospects) and the appointment of George Gervais (formerly with ARC Resources since 1999 as VP Business Development and previously Manager of Engineering) as VP Exploitation.
Impact
Neutral. Operating costs should decrease on a per unit basis as they did in 2011 when the company ramped H2/12 production. We had previously forecast a Q3/12 average of 42,500 BOE/d, which while still possible given the stable of pending wells and rig activity, has been tempered in our forecasts to 40,875 BOE/d. No changes to our Q4/12 forecast (of 51,019 BOE/d) or our 2013 average production, although the carry forward of the 1% gassier mix (which we attribute to the growing percentage of production sourced from the Cardium) marginally reduces forecast cash flow.
Recommendation
BUY recommendation . Our target remains based on a 6.0x 2013E EV/DACF multiple supplemented by $3.52 of risked Bakken and Cardium upside. Management has reiterated its forecast exit rate of 52,000 to 56,000 BOE/d, which we believe is readily attainable, considering the precedent ramp-up in 2011.
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