Lightstream Resources reports Q1 results
On May5,2015 Lightstream Resources reported it's Q1 results.
Production is down about 4% from the same quarter in 2014.This is a small reduction.Lightstream was formerly called Petrobakken Resources and a little more than a year ago it traded at about $14 a share.But it bulked up on debt to buy more oil-laden acreage.Currently it has acreage in the Cardium, the Bakken and the Alberta/B.C. border area. But commodity prices fell and it had too much debt.Investors punished it by sending the price down to about $.65 per share recently.This was excessive punishment and Lightstream now is quite oversold.It went down in price in 2014 like all the junior producers but it has not yet recovered.It's debt has been pared down although it is producing considerably less than other mid-tier producers like Penn West and Pengrowth. However these juniors trade at a multiple of 2 to 4 times the Lightstream price per share.
Financial Statistics
Lightstream (LTS) produced 35,179 barrels of oil equivalent per day;a 4% reduction (43,959 barrels per day) from Q1 2014.Total production includes 76% light oil and liquids which is important because the netback is larger than on heavy oil.On an annual basis this could put production at about 40,000 barrels per day if drilling picks up later in the year.This is seen as Lightstream's most immediate problem;it's capital expenditures at $60 million are 50% lower than Q4 and 70% lower than Q1 2014.Consequently it drilled 14 wells in Q1 2015 in comparison to 50 wells in Q1 2014.It brought 20 wells onstream in comparison to 25 wells in Q1,2014. 7 wells are waiting to be completed - 5 of which will come onstream in Q2 and 2 more in Q3 2015.
Financing new Production
In 2013,Lightstream had a sizeable bundle of potentially good oil producing acreage as well as actual good oil producing acreage.But it also had a considerable amount of debt.In order to reduce it's debt to a reasonable size it had to sell off land with producing wells on it.So in 2014 production fell,land acreage fell as did total debt.Lightstream(LTS) downsized.
In this quarter LTS sold off another non-core asset worth $12.4 million.That will be used along with funds flow from operations to finance capital expenditures and hence it's drilling program.Lightstream states that there will be excess funds flow that can be used to pare down debt further.They are in the process of renegotiating debt terms and expect to bring financing charges down.Currently they have $638 million of debt drawn on their credit facility compared to $1.07 billion last year at this time.Total debt(including the draw on their credit facility) is now $1.7 billion versus $2.2 billion last year.
The rest of the year
The position of this blog is that Lightstream is in an oversold position;it has corrected more than most of the other juniors. According to Stockscharts.com( a website that has charts on commodity prices) the low for WTI was recorded in January,2015 in this cycle;the spot price was at about $45 a barrel for light oil.In January, LTS was trading at $.64 per share.It now trades at $1.58 per share.It is true that this is a 146% rise in comparison to a rise of only 29% for Twin Butte, 30% for Pengrowth and 55% for PennWest.But LTS trades now at 29.7% of the book value of it's assets whereas Twin Butte trades at 72.5% of book value, Pengrowth trades at 67.85% and Penn West trades at 23.30% of it's book value.Clearly Lightstream and Penn West are the bargains here.If LTS trades at the same percentage of book value as Pengrowth the stock would trade above $4.00 per share.Also it is true that Penn West trading at 40% of it's book value would be above $4.00 per share.This blog believes that Lightstream should not be trading at 20.7% of it's book value as the price of oil has risen and it has pared down debt quite a bit.If the spot price of oil hits $65 a barrel look for Lightstream to trade at 30 to 33% of it's book value and the price will be above $2.00 to $2.25 per share.
Production is down about 4% from the same quarter in 2014.This is a small reduction.Lightstream was formerly called Petrobakken Resources and a little more than a year ago it traded at about $14 a share.But it bulked up on debt to buy more oil-laden acreage.Currently it has acreage in the Cardium, the Bakken and the Alberta/B.C. border area. But commodity prices fell and it had too much debt.Investors punished it by sending the price down to about $.65 per share recently.This was excessive punishment and Lightstream now is quite oversold.It went down in price in 2014 like all the junior producers but it has not yet recovered.It's debt has been pared down although it is producing considerably less than other mid-tier producers like Penn West and Pengrowth. However these juniors trade at a multiple of 2 to 4 times the Lightstream price per share.
Financial Statistics
Lightstream (LTS) produced 35,179 barrels of oil equivalent per day;a 4% reduction (43,959 barrels per day) from Q1 2014.Total production includes 76% light oil and liquids which is important because the netback is larger than on heavy oil.On an annual basis this could put production at about 40,000 barrels per day if drilling picks up later in the year.This is seen as Lightstream's most immediate problem;it's capital expenditures at $60 million are 50% lower than Q4 and 70% lower than Q1 2014.Consequently it drilled 14 wells in Q1 2015 in comparison to 50 wells in Q1 2014.It brought 20 wells onstream in comparison to 25 wells in Q1,2014. 7 wells are waiting to be completed - 5 of which will come onstream in Q2 and 2 more in Q3 2015.
Financing new Production
In 2013,Lightstream had a sizeable bundle of potentially good oil producing acreage as well as actual good oil producing acreage.But it also had a considerable amount of debt.In order to reduce it's debt to a reasonable size it had to sell off land with producing wells on it.So in 2014 production fell,land acreage fell as did total debt.Lightstream(LTS) downsized.
In this quarter LTS sold off another non-core asset worth $12.4 million.That will be used along with funds flow from operations to finance capital expenditures and hence it's drilling program.Lightstream states that there will be excess funds flow that can be used to pare down debt further.They are in the process of renegotiating debt terms and expect to bring financing charges down.Currently they have $638 million of debt drawn on their credit facility compared to $1.07 billion last year at this time.Total debt(including the draw on their credit facility) is now $1.7 billion versus $2.2 billion last year.
The rest of the year
The position of this blog is that Lightstream is in an oversold position;it has corrected more than most of the other juniors. According to Stockscharts.com( a website that has charts on commodity prices) the low for WTI was recorded in January,2015 in this cycle;the spot price was at about $45 a barrel for light oil.In January, LTS was trading at $.64 per share.It now trades at $1.58 per share.It is true that this is a 146% rise in comparison to a rise of only 29% for Twin Butte, 30% for Pengrowth and 55% for PennWest.But LTS trades now at 29.7% of the book value of it's assets whereas Twin Butte trades at 72.5% of book value, Pengrowth trades at 67.85% and Penn West trades at 23.30% of it's book value.Clearly Lightstream and Penn West are the bargains here.If LTS trades at the same percentage of book value as Pengrowth the stock would trade above $4.00 per share.Also it is true that Penn West trading at 40% of it's book value would be above $4.00 per share.This blog believes that Lightstream should not be trading at 20.7% of it's book value as the price of oil has risen and it has pared down debt quite a bit.If the spot price of oil hits $65 a barrel look for Lightstream to trade at 30 to 33% of it's book value and the price will be above $2.00 to $2.25 per share.
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