Derek is in the hotseat
I am presently a shareholder of Pengrowth Oil and Gas;the chief executive officer is Derek Evans apparently a brother of John Evans a former president of the University of Toronto.A prestigious name but not a prodigious forecaster.In the Q1 quarterly report Pengrowth stated that after the merger with N.A.E oil and gas that their combined production should be 100,000 barrels of oil equivalent per day.Their Q4 report for 2013 showed annual production of 84,000 barrels but production for the quarter was only 77,700 barrels.Furthermore guidance for 2014 was 71,000 to 73,000 barrels.This may or may not be due to their decline rate or it may be a bad year for drilling and exploration.Either way production has to get above 71,000 barrels.
Natural gas
It was generally thought that in 2012 Pengrowth had large natural gas reserves.Also N.A.E was supposed to be a natural gas producer.In their last quarter Pengrowth show that natural gas makes up only 12%of total production.This could have made an increase in revenues with the increase in the price of natural gas;natural gas has increased in price by almost 40 % over early 2013.Instead Pengrowth shows that revenues increased on an annual basis from $1.18 billion to $1.32 billion - a slight increase.
Financially speaking
In a separate report Pengrowth states that it had an annual net loss of $317 million in comparison to a small profit in 2012.Qtrade(a broker) shows that EBITDA was -$199 million for the year.Derek Evans predicted a positive EBITDA for 2014 of $575 to $625 million.That translates into $1.10 to $1.20 a share for the year.This is a healthy financial situation if true.But he hasn't been a very good forecaster in the past.All the recent reports are counting on things turning when their heavy oil play comes onstream but that will not be until 2015.In the meantime production is expected to drop for 2014.However their reserves have increased and went from 14 times annual production to 17 times;this produces a N.A.V. of $7.52 to $11.80 depending on the discount rate used.But production must come up from the forecasted 71,000 to 73,000 barrels using these reserves.If not then they need an acquisition to help.
A Perpetual Deal
Pengrowth's big heavy oil play is south of Fort McMurray in Alberta.They could use an acquisition in Alberta that fits into this property especially one that has a heavy oil property just nearby in Mannville,Alberta.Perpetual has annual production of about 19,000 barrels of oil equivalent per day;in addition it has a heavy debt load.Perpetual also has a feed into the Alliance Pipe line.Perpetual is primarily a natural gas and natural gas liquids producer.This makes an excellent addition to Pengrowth's primarily oil production.
The cost
It is not clear what Perpetual Energy would cost but it has had to reduce production by selling off assets to reduce debt.It intends to sell off more assets this year.Pnegrowth does not have excessive debt now.In it's last report it says that it has $1.6 billion of debt with a credity facility of another$1 billion plus $450 million in cash on hand.The $1.6 billion is only 3 times 2013 funds flow and Derek has predicted another $540 positive cash flow in 2014.Pengrowth may not decide to pick up Perpetual Energy(it's neighbour) but it would be easy to manage both assets.One thing is clear Pengrowth need to increase it's production in 2014;it cannot depend so heavily on the production from Lindberg it's heavy oil play because it won't come onstream until 2015 that is if Derek Evans has forecasted this correctly and he hasn't been too reliable in the past.
send comments and requests for advice to daleandmac@gmail.com
Natural gas
It was generally thought that in 2012 Pengrowth had large natural gas reserves.Also N.A.E was supposed to be a natural gas producer.In their last quarter Pengrowth show that natural gas makes up only 12%of total production.This could have made an increase in revenues with the increase in the price of natural gas;natural gas has increased in price by almost 40 % over early 2013.Instead Pengrowth shows that revenues increased on an annual basis from $1.18 billion to $1.32 billion - a slight increase.
Financially speaking
In a separate report Pengrowth states that it had an annual net loss of $317 million in comparison to a small profit in 2012.Qtrade(a broker) shows that EBITDA was -$199 million for the year.Derek Evans predicted a positive EBITDA for 2014 of $575 to $625 million.That translates into $1.10 to $1.20 a share for the year.This is a healthy financial situation if true.But he hasn't been a very good forecaster in the past.All the recent reports are counting on things turning when their heavy oil play comes onstream but that will not be until 2015.In the meantime production is expected to drop for 2014.However their reserves have increased and went from 14 times annual production to 17 times;this produces a N.A.V. of $7.52 to $11.80 depending on the discount rate used.But production must come up from the forecasted 71,000 to 73,000 barrels using these reserves.If not then they need an acquisition to help.
A Perpetual Deal
Pengrowth's big heavy oil play is south of Fort McMurray in Alberta.They could use an acquisition in Alberta that fits into this property especially one that has a heavy oil property just nearby in Mannville,Alberta.Perpetual has annual production of about 19,000 barrels of oil equivalent per day;in addition it has a heavy debt load.Perpetual also has a feed into the Alliance Pipe line.Perpetual is primarily a natural gas and natural gas liquids producer.This makes an excellent addition to Pengrowth's primarily oil production.
The cost
It is not clear what Perpetual Energy would cost but it has had to reduce production by selling off assets to reduce debt.It intends to sell off more assets this year.Pnegrowth does not have excessive debt now.In it's last report it says that it has $1.6 billion of debt with a credity facility of another$1 billion plus $450 million in cash on hand.The $1.6 billion is only 3 times 2013 funds flow and Derek has predicted another $540 positive cash flow in 2014.Pengrowth may not decide to pick up Perpetual Energy(it's neighbour) but it would be easy to manage both assets.One thing is clear Pengrowth need to increase it's production in 2014;it cannot depend so heavily on the production from Lindberg it's heavy oil play because it won't come onstream until 2015 that is if Derek Evans has forecasted this correctly and he hasn't been too reliable in the past.
send comments and requests for advice to daleandmac@gmail.com
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