Last week, Canada’s Harper government released its fall fiscal update, which predicted a $1.9 billion government surplus in 2015-16 and real GDP growth of 2.6% for 2015. These promising forecasts come in spite of falling oil prices that have created economic uncertainty around the oil patch, but with the country showing strong signs of continued growth, Oil and Gas 360® continues its look at the Canadian oil and gas space with an examination of four more Canadian E&P companies.
Encana Corp. (ticker: ECA)
Comparative Financial and Operational Metrics for ECA (approximate numbers): Encana’s enterprise value is $17.6 billion. Trailing twelve month (TTM) production is 515.7 MBOEPD, with 2013 proved reserves of 1,529 MMBOE. The company’s production is 86% natural gas, 14% oil and liquids. TTM CapEx as of June 30, 2014 is $2.43 billion. TTM EBITDA as of June 30, 2014 is $2.94 billion. The company’s balance sheet at the end of 2Q 2014 reported debt of $6.12 billion. Net debt / TTM EBITDA = 1.2x
Encana is a leading North American energy producer that is focused on growing a diverse resource portfolio with multiple plays producing natural gas, oil and natural gas liquids. The company values profitability over production volumes and focuses its investment on a limited number of core growth plays. Encana completed a deal with Texas based Athlon Energy Inc. (ticker: ATHL) September 13 of this year to acquire 140,000 net acres in the Permian Basin. The deal means that Encana now operates in Canada’s top two resource plays, the Montney and Duverney, as well as the top two oil plays in the U.S., the Eagle Ford and Permian, plus its position in the DJ basin. Athlon’s 30,000 BOEPD Permian production, along with future development value of the area, will help Encana reach its production goal of 250,000 BOEPD by 2017.
Speaking on Nov. 13, 2014, at the Bank of America – Merrill Lynch Global Energy Conference, David Hill, Executive Vice President of Exploration & Business Development said:
“We expect our Permian production will grow between 200,000 BOEPD and 250,000 BOEPD over the next five years, and potentially reach even higher levels in the following years if we were successful in developing and unlocking the entire horizontal well inventory we see here today. The combined impact of the Eagle Ford and the Permian acquisitions is highly accretive to our former 10% per year cash flow per share growth target that we set for 2013 to 2017. We now believe that metric will average about 20% per year.”
“Our plan, just like the Eagle Ford, is really to hit the ground running in 2015 and deploy at least a $1 billion of capital in the Midland basin direct, and primarily to the drill bit. There are currently four horizontal rigs running in the Permian. We plan to bring a fifth horizontal rig by the year-end and expect to add seven horizontal rigs total running by the end of 2015 as well as six to eight vertical rigs running. These assets are currently producing at an average rate of about 32,000 barrels of oil equivalent per day, and we expect 2015 production to average about 50,000 Boes per day.”
“By 2017, we expect that nearly 50% of the production will come from liquids. This is a tremendous shift when you consider that only a year ago, 10% of our production was from liquids. Total liquid production averaged over 100,000 barrels a day for EnCana in the third quarter.”
Read more about Encana’s acquisition of Athlon Energy here.
Vermilion Energy Inc. (ticker: VET)
Comparative Financial and Operational Metrics for VET (approximate numbers): Vermilion’s enterprise value is $8.1 billion. Trailing twelve month (TTM) production is 42.4 MBOED, with 2013 proved reserves of 129 MMBOE. The company’s production is 40% natural gas, 60% oil and liquids. TTM CapEx as of June 30, 2014 is $625 million. TTM EBITDA as of June 30, 2014 is $938 million. The company’s balance sheet at the end of 2Q 2014 reported debt of $1.2 billion. Net debt / TTM EBITDA=1.1x
Vermilion is a Calgary, Alberta based international oil and gas producer that has been in operation for 20 years. It is an oil-leveraged producer that adheres to a strategy of full cycle exploration and production programs focused on the acquisition, exploration, development and optimization of producing properties in Western Canada, Europe and Australia. Vermilion targets growth in production primarily through the exploitation of conventional resource plays in Western Canada, including Cardium light oil and liquids rich natural gas, the exploration and development of high impact natural gas opportunities in the Netherlands and Germany and through drilling and workover programs in France and Australia. The company has a production target of 51,000 – 53,000 BOEPD in 2015 through the exploitation of both conventional and unconventional resource plays, the exploration and development of high impact natural gas, and through its drilling and workover programs.
Speaking on the company’s Oct. 11, 2014 conference call, Lorenzo Donadeo, Vermilion’s CEO said:
“During the quarter, we generated fund flow from operations of CAD 197.9 million or CAD 1.85 per basic share. And this compares to CAD 216.1 million or CAD 2.05 per basic share in the prior quarter and CAD 165.6 million or CAD1.63 per basic share in the third quarter of 2013. The quarter-over-quarter decrease was primarily attributable to lower commodity pricing combined with a build in crude oil inventories in France and Australia of approximately 104,000 barrels.”
“Our Germany acquisition completed in February of this year provides us with entry into a sizeable market with a long history of oil and gas development activity, low political risk, and strong marketing fundamentals.”
“In late April 2014, we announced the completion of our acquisition in southeast Saskatchewan, establishing a new core area for Vermilion in Canada. The acquired assets consist of high netback, light oil production in the Northgate region and include approximately 57,000 net acres of land approximately 80% undeveloped, seven oil batteries, and preferential access to 50% or greater capacity as a third party solution gas facility that is nearing completion.”
“Additionally in late September, we completed CAD11.1 billion transaction which marks our first acquisition in the United States. This transaction represents a low cost entry position in the prolific Powder River basin of northeastern Wyoming.”
“In Canada, we remained active drilling conventional horizontal wells in each of our Cardium light-oil and Mannville condensate rich gas resource plays in Central Alberta … While Mannville condensate-rich gas program continues to achieve robust economics with after-tax rates of return currently in excess of 100%, we’ve really just began development of this play, having now drilled about 3% of out Mannville prospect inventory resulting in exit production for the quarter … of approximately 4,000 BOEPD.”
Crew Energy Inc. (ticker: CR)
Comparative Financial and Operational Metrics for CR (approximate numbers): Crew’s enterprise value is $1.2 billion. Trailing twelve month (TTM) production is 22.3 MBOED, with 2013 proved reserves of 115 MMBOE. The company’s production is 67% natural gas, 33% oil and liquids. TTM CapEx as of June 30, 2014 is $395 million. TTM EBITDA as of June 30, 2014 is $200 million. The company’s balance sheet at the end of 2Q 2014 reported debt of $244 million. Net debt / TTM EBITDA = 1.2x
Crew is an oil and natural gas producer focused on sustainable per share growth through a mix of exploration and development, and strategic acquisitions. The company operates primarily in the Montney play in northeast British Columbia with approximately 487 net sections, 72% of which is currently undeveloped. It also has Lloydminster heavy oil property in Alberta and Saskatchewan. Crew is targeting exit production of 45,000 BOEPD in 2018.
Bellatrix Exploration Ltd. (ticker: BXE)
Comparative Financial and Operational Metrics for BXE (approximate numbers): Bellatrix’s enterprise value is $1.4 billion. Trailing twelve month (TTM) production is 22.5 MBOED, with 2013 proved reserves of 124 MMBOED. The company’s production is 64% natural gas, 34% oil and liquids. TTM CapEx as of June 30, 2014 is $456 million. TTM EBITDA as of June 30, 2014 is $295 million. The company’s balance sheet at the end of 2Q 2014 reported debt of $335 million. Net debt / TTM EBITDA = 1.1x
Bellatrix is an E&P company based in Calgary, Alberta. The company’s focus is the exploration and development of light oil and liquids-rich natural gas opportunities in Canada’s Western Canada Sedimentary Basin. Currently, the company is focusing on developing its two core plays, the Cardium and the Notikewin/Falher intervals in Western Canada. The company has a large inventory of low risk development locations where it controls regional facilities and infrastructure. Bellatrix has 424,452 net acres of undeveloped land, representing over 30 years of drilling inventory.
Speaking on Nov. 4, 2014, Raymond G. Smith, President & Chief Executive Officer:
“Bellatrix posted production volumes up 73%; funds flow from operations, up 101%; revenue, up 101%; and record earnings, up 52% in the third quarter of 2014 compared to 2013. Year-to-date, our earnings were $209 million…”
“In addition, Bellatrix continues to excel technically, achieving 20 consecutive quarters of a 100% success in drilling and completing wells in the company’s two key core plays: the Cardium and the Spirit River. In the first nine months of 2014 Bellatrix successfully drilled 98 gross wells utilizing horizontal drilling and multi-stage completion techniques.”
Brent A. Eshleman, Executive Vice-President and Chief Operating Officer, said:
“On a corporate basis, Bellatrix reported record sales of 37,838 BOEPD, comprised of 69% natural gas, representing 73% year-over-year growth as compared to the third quarter of 2013. Fund flow from operations for Q3 2014 was CAD60.3 million or CAD0.32 per basic share. This represents aggregate growth of 101% year-over-year or 14% on a per share basis. Despite facility constraints experienced during the quarter, Bellatrix continued to maintain its low operating cost profile with average third quarter operating cost of CAD8.85 a BOE, reduction from the CAD8.98 per BOE average cost in the comparative quarter of 2013.”
See Oil & Gas 360®’s exclusive interview with Bellatrix COO Brent Eshleman here.
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