Pengrowth is going to have a good year
Pengrowth came out with an operational update a couple of weeks ago.In it they outlined their capital expenditures, both for their heavy oil asset and their conventional gas properties.They intend to spend about $715 million on capital expenditures.However they also came out with their forecast of funds flow.They are forecasting $500 to $540 million for 2014.This seems unlikely given their net income figures over the last three quarters.It is true that since they acquired N.A.E Oil and Gas that they have sold off $1 billion of non-core assets and reduced their debt somewhat.They have also had negative EBITDA for three quarters.Positive funds flow of $500 million for 2014 is a massive increase.
Pengrowth's forward earnings
Pengrowth forecasted in their operational update earnings of $500 to $540 million.They have not had positive earnings since they acquired N.A.E. Oil and Gas.However they have taken large impairment charges each quarter.It is possible that with no or small impairment charges they might show positive earnings but not likely $540 million.Aiming for $250 million might seem more reachable.Derek Evans has done a great job but can he meet his forecast or will he change it in the second quarter like everyone expects.To his credit, the forecast was made before natural gas had it's recent run up.This makes his forecast more reachable.
More restructuring
Pengrowth still has both old and recently acquired assets that are spread out and harder to manage.For example,Pengrowth has some natural gas assets on the east coast(Nova Scotia) and this should be viewed by Mr.Evans as non-core assets although valuable assets.Sooner or later Derek Evans will see that he has a neighbour next door to him that has very valuable assets and is making little net income.This neighbour even has a pipeline and a connection to the Alliance Pipeline.Perpetual Energy is the neighbour and it's assets have a NAV of greater than $3.10 per share although it trades at only $1.30 per share.It's assets are in the Mannville and West Edson area of Alberta.This is literally next door and would be a perfect fit with his natural gas properties.
Derek Evans is a pretty good C.E.O but is unlikely to meet his forecast of $540 million or $1 per share;this if it happens will bring a P/E ratio of 7 times forward earnings and well below the multiple of 15 for the entire TSX.A forward P/E ratio of 7,8,or 9 would make Pengrowth one of the cheapest stocks on the T.S.X.and that would be before it does any restructuring. see blogdaleupsome for advice on resource stocks
Pengrowth's forward earnings
Pengrowth forecasted in their operational update earnings of $500 to $540 million.They have not had positive earnings since they acquired N.A.E. Oil and Gas.However they have taken large impairment charges each quarter.It is possible that with no or small impairment charges they might show positive earnings but not likely $540 million.Aiming for $250 million might seem more reachable.Derek Evans has done a great job but can he meet his forecast or will he change it in the second quarter like everyone expects.To his credit, the forecast was made before natural gas had it's recent run up.This makes his forecast more reachable.
More restructuring
Pengrowth still has both old and recently acquired assets that are spread out and harder to manage.For example,Pengrowth has some natural gas assets on the east coast(Nova Scotia) and this should be viewed by Mr.Evans as non-core assets although valuable assets.Sooner or later Derek Evans will see that he has a neighbour next door to him that has very valuable assets and is making little net income.This neighbour even has a pipeline and a connection to the Alliance Pipeline.Perpetual Energy is the neighbour and it's assets have a NAV of greater than $3.10 per share although it trades at only $1.30 per share.It's assets are in the Mannville and West Edson area of Alberta.This is literally next door and would be a perfect fit with his natural gas properties.
Derek Evans is a pretty good C.E.O but is unlikely to meet his forecast of $540 million or $1 per share;this if it happens will bring a P/E ratio of 7 times forward earnings and well below the multiple of 15 for the entire TSX.A forward P/E ratio of 7,8,or 9 would make Pengrowth one of the cheapest stocks on the T.S.X.and that would be before it does any restructuring. see blogdaleupsome for advice on resource stocks
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