This week’ look at Canadian E&Ps includes four companies with operations in all parts of the Americas, from Canada down to South America.
Bonavista Energy Corp. (ticker: BNP)
Comparative Financial and Operational Metrics for BNP (approximate numbers): Bonavista Energy Corp’s enterprise value is $2.97 billion. Trailing twelve month (TTM) production is 65.2 MBOEPD, with 2013 proved reserves of 256 MMBOE. The company’s production is 62% natural gas, 38% oil and liquids. TTM CapEx as of September 30, 2014 is $ 625 million. TTM EBITDA as of September 30, 2014 is $607 million. The company’s balance sheet at the end of 3Q 2014 reported debt of $1.01 billion. Net debt / TTM EBITDA = 1.7x
Bonavista is an oil and gas producer headquartered in Calgary, Alberta. The company focuses on production efficiency and maintaining operational strength by developing low-cost economic opportunities and using cost controls to keep a strong balance sheet.
Bonavista’s core plays are found in four regions: The Northern, the Deep Basin, West Central and the Eastern play. The company’s Northern play has an average production of 8,251 BOEPD and is concentrated on the Blueberry Montney field. The Deep Basin has an average production of 16,045 BOEPD mainly from the Blusky and Wilrich fields. The West Central region is the company’s largest area of operation with an average production of 48,247 BOEPD, focused in the Glauconite, Ellerslie and Cardium formations. The Eastern region has an average production of 2,177 BOEPD and is still largely undeveloped.
In its Q3’14 filings, the company reported a net income of $2.42 billion, up 5% from $2.30 billion from the same quarter in 2013. Bonavista saw a 7% reduction in operating costs to $8.21 per BOE and a 5% reduction in cash costs to $12.28 per BOE, resulting in operating netbacks of $21.54 per BOE, a 5% improvement from Q3’13.
In the company’s MD&A for the three and nine months ended September 30, 2014, the company said:
“The goal of Bonavista’s business model remains consistent with a commitment to generate an attractive return to shareholders through a sustainable balance between dividends and corporate growth. Targeting a dividend rate between 20% and 30% of funds from operations will allow the corporation to withhold sufficient funds to finance capital expenditures required to modestly grow the production base over the long-term, assuming current strip pricing is realized.”
“As part of our financial management strategy, Bonavista has adopted a disciplined commodity price risk management program. The purpose of this program is to stabilize funds from operations against volatile commodity prices and to protect acquisition and development economics. Bonavista’s Board of Directors has approved a commodity price risk management limit of 70% of the current year’s budgeted revenues, net of royalties and 60% thereafter, provided that no more than 80% of forecasted revenues, net of royalties, from any one product may be hedged, or in the case of electricity, 60% of Bonavista’s forecasted consumption. The term of any commodity hedge will be limited to no more than three calendar years subsequent to the current calendar year in which a hedge is executed.”
Enerplus Corp. (ticker: ERF)
Comparative Financial and Operational Metrics for ERF (approximate numbers): Enerplus Corp.’s enterprise value is $4.14 billion. Trailing twelve month (TTM) production is 85.8 MBOEPD, with 2013 proved reserves of 261 MMBOE. The company’s production is 51% natural gas, 49% oil and liquids. TTM CapEx as of September 30, 2014 is $ 1.23 billion. TTM EBITDA as of September 30, 2014 is $856 million. The company’s balance sheet at the end of 3Q 2014 reported debt of $1.09 billion. Net debt / TTM EBITDA = 1.3x
Enerplus has a portfolio of oil and natural gas assets in four core areas in Canada and the U.S. The company concentrates on maintaining a balance between oil and natural gas production to help mitigate the risk associated with any one commodity.
The company’s oil portfolio includes opportunities in the Bakken/Three Forks play in North Dakota, as well as crude production from a variety of crude oil waterflood properties across Western Canada. The company’s gas assets include positions in the Marcellus shale formation in the U.S. and undeveloped natural gas land positions in the liquids rich Deep Basin area in Western Canada in addition to other conventional natural gas and oil production throughout the Western Canadian Sedimentary Basin.
In its Q3’14 filings, the company reported an average production of 104 MBOEPD, up from 88 MBOPED in Q3’13, representing a 16% increase. The company reported especially strong improvements in its Bakken/Three Forks play, where production increased by approximately 1,600 BOEPD from Q2’14.
The company maintained funds flow quarter over quarter of $213 million ($1.04 per share), despite the drop in commodity prices. The company announced that it would suspend its Stock Dividend Program in order to reduce dilution and help to improve per share metrics in the future.
Speaking during the company’s Q3 conference call, on September 7, 2014, Ray Daniels, Senior Vice President of Operations of Enerplus said:
“We delivered another solid quarter operationally with continued growth in liquids production. We invested a total of C$208 million ($181.75 million) in development capital in the third quarter, drilling just over 19.3 net wells and bringing 17.3 net wells on stream.”
“The majority of our activity continue to be focused on oil projects, particularly in North Dakota, where we invested C$96 million ($83.89 million), targeting both the Bakken and the Three Forks wells. We drilled 6.6 net wells with 5.6 net wells brought on-stream. We achieved another quarter of record production in Fort Berthold at about 22,400 BOEPD, up almost 1,600 BOEPD from our high in second quarter.”
“Taking a look at our activity year-to-date, we continue to see very strong well performance. We’ve drilled a total of 19 wells with 13 wells brought on-stream. Our operated drilling activity has been focused in the central and northern half of our acreage. Overall, we’re seeing higher initial production rates and shallower declines.”
“The 30-day initial production rates on our two-mile horizontal wells drilled in both the Bakken and Three Forks have averaged 1,725 barrels per day. This is about 20% above our highest type well. We’re also seeing shallower declines as our 90-day initial production rates have averaged over 1,300 barrels a day, which is also about 20% higher than our high-end type well.”
Gran Tierra Energy Inc. (ticker: GTE)
Comparative Financial and Operational Metrics for GTE (approximate numbers): Gran Tierra Energy’s Corp’s enterprise value is $694 million. Trailing twelve month (TTM) production is 20.4 MBOEPD, with 2013 proved reserves of 42 MMBOE. The company’s production is 5% natural gas, 95% oil and liquids. TTM CapEx as of September 30, 2014 is $ 357 million. TTM EBITDA as of September 30, 2014 is $452 million. The company’s balance sheet at the end of 3Q 2014 reported no debt. Net debt / TTM EBITDA = -0.8x
Gran Tierra was incorporated in Alberta, Canada, in 2005. The company’s strategy is to establish a base of production through acquisitions, build and consolidate regional positions in South America and to add value via drilling.
The company’s inaugural acquisition in Argentina in 2005 was followed by the acquisition of Argosy Energy International in Colombia, and a mix of assets in Argentina to consolidate its position in the country in 2006. In addition, two exploration licenses in Peru were signed.
In December 2014, the company was producing approximately 1,300 BOPD in Brazil and 24,000 BOPD in Colombia. The company holds a 100% working interest operatorship on five blocks in the Marañon basin in Peru and expects first production from its assets in the country before year-end 2014.
In its Q3’14 filings, the company reported an average production 25,340 BOEPD gross working interest, or 20,641 BOEPD net after royalties and adjusted for inventory changes and losses. Revenue and other income for the quarter was $162.3 million; a 9% increase from $148.5 million in the second quarter of 2014, and a 5% decrease from $171.3 million in Q3’13. The company’s net income for the quarter was $4.2 million, or $0.15 per share basic and diluted, was $35.1 million higher than net income of $9.1 million, or $0.03 per share basic and diluted, in Q2’14 and increased from net income of $33.1 million, or $0.12 per share basic and diluted, in comparison with Q3’13.
Speaking during the company’s Q3 conference call on September 6, 2014, Dana Coffield, President and CEO of Gran Tierra, said:
“In Colombia, the Costayaco and Moqueta fields continued to deliver strong production and cash flow. I am happy to announce the Moqueta Exploitation License was finally approved. And we continue to work towards production levels of approximately 8,000 BOPD gross in 2015.”
“In Peru, the Bretaña field development is progressing as we get closer to first production. The long-term test production from the Bretaña discovery well is expected to begin in December, with production expected to reach a rate of approximately 2,500 BOPD gross.”
“Finally, in Brazil, … our production from continuing operations for the third quarter of 2014 averaged 25,340 BOEPD. 99% of this production is oil.”
Pengrowth Energy Corp. (ticker: PGH)
Comparative Financial and Operational Metrics for PGH (approximate numbers): Pengrowth Energy’s enterprise value is $3.46 billion. Trailing twelve month (TTM) production is 61.5 MBOEPD, with 2013 proved reserves of 306 MMBOE. The company’s production is 35% natural gas, 65% oil and liquids. TTM CapEx as of September 30, 2014 is $1.85 billion. TTM EBITDA as of September 30, 2014 is $549 million. The company’s balance sheet at the end of 3Q 2014 reported debt of $1.72 billion. Net debt / TTM EBITDA = 3.1x
Pengrowth is headquartered in Calgary, Alberta. The company is focused on maintaining a strong balance sheet by implementing a sustainable business model, which includes sales of non-core assets to finance low-decline thermal projects and maintain the company’s dividend.
The company’s operations are concentrated in the Western Canadian Sedimentary Basin. Pengrowth uses new technology to get more from existing conventional assets and uses unconventional thermal technology to achieve low decline production.
In its Q3’14 filings, the company stated that average production for 2014 was 73,789 BOEPD, exceeding 2014 Guidance driven by performance of the company’s new Cardium development wells. The company is on plan to deliver near the top end of full-year production Guidance of 71,000-73,000 BOEPD.
Year-to-date operating expenses were $15.93 per BOE, exceeding 2014 Guidance. Pengrowth anticipates full year 2014 operating expenses per BOE to be within 2014 Guidance. Year-to-date 2014 capital expenditures amounted to $645.2 million, including $361.9 million invested at Lindbergh. Pengrowth is on track to achieve the full year 2014 CapEx Guidance of $740-770 million.
Speaking during the company’s Q3 conference call on October 30, 2014, Derek Watson Evans, President and CEO of Pengrowth, said:
“With commissioning activities at Lindbergh starting up and our conventional business continuing to meet expectations, the third quarter marks another significant milestone in Pengrowth’s transition to sustainable growth. We continue to deliver on our strategic plan and we remain confident in our future. We’re in the best shape we’ve been in for some time in terms of visibility and the robustness of the go-forward plan and the growth prospects for the company.”
“Our conventional business is firing on all cylinders. Completion of the first phase of our Lindbergh thermal commercial project is just around the corner and our cash flow is well protected by our extensive hedge positions. These factors are expected to provide Pengrowth with the platform needed to achieve long-term sustainable growth in production and cash flow starting in 2015, where we anticipate a significant increase in funds flow per share.”
“The Lindbergh pilot, after 32 months of production, continues to exceed expectations with higher than expected production rates and reserves recovered to date. Lindbergh’s robust economics make it a strong viable project even in low commodity price environments. Pengrowth estimates that Lindbergh can still generate a 10% rate of return, at a WTI oil price of approximately $50 per barrel.”
“The recent weakness in oil and natural gas prices reaffirms our belief and commitment to our extensive oil and natural gas hedging program, which continues to provide cash flow certainty in a volatile commodity price environment. The hedging program is designed to provide stability to cash flows, ensuring Pengrowth’s ability to support the payment of dividend and the funding of capital program commitments. Pengrowth hedging programs should benefit shareholders over the coming months, particularly if the current price environment persists through 2015.”
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