Pengrowth Energy has a solid quarter
Pengrowth is an intermediate oil and gas producer primarily with Alberta properties.It reported production of 75,102 barrels of oil equivalent per day - slightly ahead of the last quarter. However it provided guidance of positive funds flow for 2014 of about $540 to $550 million. This quarter it showed $140 million funds flow which on an annualized basis might hit $560 to $570 million-ahead of guidance.The main reason that production was not higher was because of low activity on natural gas properties and low production here.Still funds from operations was up 33% from Q4 2013.
Progress on Lindberg
Lindberg is Pengrowth's major new project.It is intended to have production of 12,500 barrels per day by the first quarter of 2015.Yet 75% of the planned capital has already been spent and it already has pilot production of 1800 barrels per day.Pengrowth has approval for 12,500 barrels per day and made an application for 30,000 barrels.It should have permission soon but did some drilling around Lindberg and found out that estimated reserves are close to 100 million barrels of heavy oil. Pengrowth could eventually get 50,000 barrels per day from Lindberg.But it is not clear why Pengrowth couldn't have 5000 to 6000 barrels by the fourth quarter to bolster their flagging conventional production.This would help to make the third quarter look better and the fourth quarter look pretty good.New capital expenses could be restricted on their other conventional properties.
Comparison to Penn West Petroleum
The natural comparison for Pengrowth is Penn West.Both had negative EBITDA in 2013 and both had changes to make.Penn West fell from $13 a share to about $8 but has moved it's way back to the $9.50 to $9.90 area.Penn West also has more assets than Pengrowth but Pengrowth is slowly moving into new and greater production.Slower than some investors would like but it is coming.If Pengrowth is going to move closer to Penn West(it's big brother) it needs new production.Right next door is Perpetual Energy with almost 20,000 barrels of oil equivalent per day production.This is primarily natural gas production. It also has gas processing equipment and a connection to the Alliance Pipeline.Perpetual is not too expensive ,at a $1.65 per share and a market capitalization of only$245 million.
Catching up to Penn West
If Pengrowth hopes to close the gap on the price differential with Penn West it needs more production.Heavy oil is preferable to natural gas at today's prices to natural gas. So moving the schedule forwards on Lindberg production is a must.However before the price of natural gas moves up ,taking a chunk of Perpetual Energy is a very progressive investment and still not that expensive.These two moves might bring Pengrowth closer to the Penn West share price and about $7.50 to $7.75 a share soon.
Progress on Lindberg
Lindberg is Pengrowth's major new project.It is intended to have production of 12,500 barrels per day by the first quarter of 2015.Yet 75% of the planned capital has already been spent and it already has pilot production of 1800 barrels per day.Pengrowth has approval for 12,500 barrels per day and made an application for 30,000 barrels.It should have permission soon but did some drilling around Lindberg and found out that estimated reserves are close to 100 million barrels of heavy oil. Pengrowth could eventually get 50,000 barrels per day from Lindberg.But it is not clear why Pengrowth couldn't have 5000 to 6000 barrels by the fourth quarter to bolster their flagging conventional production.This would help to make the third quarter look better and the fourth quarter look pretty good.New capital expenses could be restricted on their other conventional properties.
Comparison to Penn West Petroleum
The natural comparison for Pengrowth is Penn West.Both had negative EBITDA in 2013 and both had changes to make.Penn West fell from $13 a share to about $8 but has moved it's way back to the $9.50 to $9.90 area.Penn West also has more assets than Pengrowth but Pengrowth is slowly moving into new and greater production.Slower than some investors would like but it is coming.If Pengrowth is going to move closer to Penn West(it's big brother) it needs new production.Right next door is Perpetual Energy with almost 20,000 barrels of oil equivalent per day production.This is primarily natural gas production. It also has gas processing equipment and a connection to the Alliance Pipeline.Perpetual is not too expensive ,at a $1.65 per share and a market capitalization of only$245 million.
Catching up to Penn West
If Pengrowth hopes to close the gap on the price differential with Penn West it needs more production.Heavy oil is preferable to natural gas at today's prices to natural gas. So moving the schedule forwards on Lindberg production is a must.However before the price of natural gas moves up ,taking a chunk of Perpetual Energy is a very progressive investment and still not that expensive.These two moves might bring Pengrowth closer to the Penn West share price and about $7.50 to $7.75 a share soon.
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