A Pengrowth Energy update
Pengrowth,last year bought another natural gas producer called N.A.E Oil and Gas.It was a large acquisition and so it took on some new debt.Now it has reduced it's debt and will have sold off more than a billion dollars of non-core assets by the first quarter of 2014.Pengrowth will be spending $365 million to develop it's heavy oil property called Lindberg but it is chiefly a natural gas producer.It stands to gain handsomely from the recent run-up in the price of natural gas.However lately it has come up with an operational update.The Pengrowth update did not count on gains from the long standing dormant price of natural gas.
Capital budget for 2014
Pengrowth says it will have a $715 capital budget in 2014. $365 million for it's heavy oil asset called Lindberg and $350 million for it's other plays.Pengrowth thereby expects production of 71,000 to 73,000 barrels of oil equivalent per day and 12,500 barrels more(of heavy oil) from Lindberg in 2015.At these natural gas prices the net back from heavy oil is greater.So production from Lindberg will be more profitable than from natural gas plays.However the net back from natural gas is increasing.
2014 net income
In 2013 Pengrowth had a negative EBITDA but for 2014 expects to have a positive funds flow of $500 to $540 million.EBITDA they expect will be about $575 to $625 million. Now these figures look to be on the low side.But with 521 million shares, earnings will be at least $1 per share.At a price of $7.50 per share for Pengrowth,it's multiple will be well below the P/E ratio of the T.S.X.It is easy to see Pengrowth trading at a P/E ratio of 10.This will put Pengrowth shares at $10 before there is any production from Lindberg.
Trading on it's asset value
Both Pengrowth and Penn West have been trading on their asset value for 2013.Both had negative EBITDAs,but nowPengrowth will be trading on it's net income value.And it's net income will be growing through 2014 and in 2015.It is calculated that with 521 million shares that Pengrowth spends about $250 million on it's dividend.Pengrowth cut it's dividend in 2013 and may be looking to restore it's dividend to it's old level before 2015.
Capital budget for 2014
Pengrowth says it will have a $715 capital budget in 2014. $365 million for it's heavy oil asset called Lindberg and $350 million for it's other plays.Pengrowth thereby expects production of 71,000 to 73,000 barrels of oil equivalent per day and 12,500 barrels more(of heavy oil) from Lindberg in 2015.At these natural gas prices the net back from heavy oil is greater.So production from Lindberg will be more profitable than from natural gas plays.However the net back from natural gas is increasing.
2014 net income
In 2013 Pengrowth had a negative EBITDA but for 2014 expects to have a positive funds flow of $500 to $540 million.EBITDA they expect will be about $575 to $625 million. Now these figures look to be on the low side.But with 521 million shares, earnings will be at least $1 per share.At a price of $7.50 per share for Pengrowth,it's multiple will be well below the P/E ratio of the T.S.X.It is easy to see Pengrowth trading at a P/E ratio of 10.This will put Pengrowth shares at $10 before there is any production from Lindberg.
Trading on it's asset value
Both Pengrowth and Penn West have been trading on their asset value for 2013.Both had negative EBITDAs,but nowPengrowth will be trading on it's net income value.And it's net income will be growing through 2014 and in 2015.It is calculated that with 521 million shares that Pengrowth spends about $250 million on it's dividend.Pengrowth cut it's dividend in 2013 and may be looking to restore it's dividend to it's old level before 2015.
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