As anticipated, Lightstream has received an initial order from the Court of Queen’s Bench of Alberta under CCAA granting the Company protection from its creditors until October 26, 2016. The Company’s proposed sales process has also been approved, which paves the way for Lightstream’s secured noteholders to make its previously agreed upon credit bid, which we expect will be ~$1,350 mm. Should the credit bid be the successful bid, both unsecured noteholders and shareholders will leave the process empty handed. With trading of the Company’s shares suspended and delisting pending we are discontinuing coverage of Lightstream with an Underperform ranking. We have lowered our target price to $0.00 as we do not expect a bid will materialize in the sales process sufficient to provide equity holders with residual value.
Companies: LIGHTSTREAM RESOURCES
Impact: Negative, as the result of a CCAA sales process has a high probability of leaving equity holders with zero residual value. Lightstream has formally entered into a CCAA sales process after failing to meet conditions under its recapitalization agreement related to litigation commenced by holders of the Company's US$254 mm of unsecured notes. The initial CCAA hearing will be on September 26, 2016. Once the CCAA process has officially commenced, we expect there will be a bidding time frame of ~30 days.
Lightstream reported quarterly results that came in ahead of our expectations on cash flow and production. The results and minor positive changes to our proforma estimates will continue to be overshadowed by the leviathan that is the Company’s ongoing recapitalization transaction. Subsequent to the earnings release the Company announced it has gained the requisite interim order to authorize the individual special meeting of all stakeholders to approve the recapitalization arrangement. These meetings will be held on September 13th. We’ve maintained our 12-month target price of $0.05 per share and Underperform ranking.
Impact: Neutral. Quarterly results came in ahead of our expectations, though in light of the Company's ongoing recapitalization transaction we view the relevance of the results as minimal.
Lightstream has entered into an arrangement agreement that will attempt to formalize the proposed recapitalization transaction announced on July 13, 2016.
Some Recovery on Segmented Cash Flow Generation Over Q1 Though Still Down 56% Y/Y. In aggregate, the Intermediate, Mid, and Small Cap groups are expected to generate 2Q16e cash flow of $1,281 mm, $183 mm, and $53 mm, or $1.517 billion in total, that while depressed relative to the same period last year (~$2.647 billion combined), is up 17% sequentially from the prior quarter, largely on the strength of crude oil price recovery in the period. Severely weak natural gas pricing picture markedly reversed into summer, market likely to ignore financials for natural gas producers and look ahead to winter and formalization of sell-side 2018e estimates in coming months. Spot AECO natural gas prices recently crested C$2.60/mcf, and with a reasonable alignment of previously distressed NE BC Stn2 differentials, augmented by a withdrawal expected next week, view the market psyche as constructive and looking ahead, with the analogy that this market is shaping up to mirror 2012 still holding. That said, with crude oil poised to retest support levels, combined with strong stock price performance broadly observed YTD, we would characterize sentiment as slightly pessimistic in the near-term which could reduce or unwind momentum-based investment strategies that have worked thus far in 2016.
Companies: AAV ARX BTE BNP CPG ERF POU PEY PGF PWT PSK VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS NVA PPY PMT PNE RRX RMP SRX SGY TOG TET ATU CKE GXE IKM LXE MQL PRQ SPE SKX TVE TVL YO ZAR
Lightstream, with support of an ad hoc committee representing a majority of its secured noteholders, has announced a recapitalization proposal which would eliminate the Company’s notes in exchange for equity. If successful, current shareholders would hold 2.25% of the recapitalized entity. If the proposal is unsuccessful, there would be an attempt to satisfy the Company’s obligations through an asset sale, which would leave minimal residual equity value. With continuing uncertainty and a number of potential outcomes all resulting in significant dilution to current shareholders, we have left our Underperform ranking and $0.05 per share 12-month target price intact.
Impact: Negative. A deferral of interest payments adds to mounting short-term obligations including a $120 mm shortfall on the Company's credit facility. Potential for a debt-to-equity swap to alleviate the debt issue would result in massive dilution for current shareholders.
Impact: Neutral. Quarterly results that were slightly below our thinking will remain overshadowed by pending debt repayment issues.
Lightstream announced 1Q16 results that were in line on a production basis but behind on cash flow as a result of weaker than expected price realizations. Production guidance for 1H16e has been revised upwards by 2% at the mid-point though will become more gas biased given an increased weighting from high impact Falher wells. No development spending is planned for 2Q16. The Company is currently in the process of seeking financing alternatives to meet both a junior debt interest payment obligation by June 15th, 2016 and a $120+ mm shortfall on its recently reduced credit facility by July 28th, 2016. In light of the looming interest and bank line repayment issues, we view dilution risk to current equity holders as high and as such continue to offer a 12-month target price of $0.05 per share and an Underperform ranking.
Lightstream’s credit facility has been cut from $550 mm to $250 mm in its semiannual borrowing base review. There is currently $371 mm outstanding under the facility, implying an overdrawn balance of ~$121 mm. A 90 day cure period has commenced where this shortfall must be addressed or the Company will trigger a default event.The Company continues to investigate various strategies to alleviate this liquidity
issue, including alternate first lien financing, asset sales, and restructuring alternatives. Failing to execute on a meaningful transaction could prevent the Company from being able to pay its next junior debt interest payment which is due on June 15th.
The Company is over-drawn by $121 mm on its re-determined credit facility and will have 90 days to remediate the deficiency.
With this publication we briefly summarize our projections for 1Q16e quarterly results for the Junior E&P (Intermediate, Mid & Small Cap) segments of our coverage universe
Companies: AAV ARX BTE BNP CPG ERF POU PEY PGF PSK VII TOU VET WCP BNE CJ CR DEE JOY KEL LTS LRE NVA PPY PMT PNE RRX RMP SRX SGY TOG TET ATU CKE GXE IKM LXE MQL RE SPE SKX TVE TVL YGR YO ZAR
With this publication we highlight various metrics and statistics forthcoming from yearend reserve books for our Domestic E&P coverage universe (Integrateds, Large Cap, Oilsands, Intermediate, Mid Cap, and Small Cap). Similar charts for YE2014 reserves can be found in our Statistical Package dated April 7, 2015.
Companies: AAV ARX BTE BNP CPG ERF POU PEY PGF PWT VII TXP VET WCP BNE CJ KEL LTS LRE NVA PPY PMT PNE RRX RMP SRX SGY TOG TET ATU BXO CKE GXE IKM LXE MQL SKX TVE TVL YGR YO ZAR
With Lightstream’s 4Q15 production figure previously disseminated in the mid- February reserve and budget update (Facts dated February 12, 2016), the focus of this release was cash flow that was 8% shy of expectations. Between $16 mm of anticipated spending earmarked for 1H16e, and negative cash flow in the range of $20 mm over this period, we forecast net debt moving dangerously higher. In the context of its normal course spring bank line review, we suspect the Company’s excess financial liquidity could be impaired in a meaningful fashion. Based on these liquidity concerns and a commodity price environment that will make it challenging for the Company to represent a going concern business plan, we maintain our target price of $0.05 per share and Underperform ranking.
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Jersey Oil & Gas has announced that it has selected a greenfield four-legged platform to develop the Greater Buchan Area which will utilise existing export pipeline infrastructure. We see near-term scope to increase materially our fair value estimate from 268p. We believe that today's news is price material and that it sets the scene for a near-term catalyst rich outlook for the company. It is an opportune time, in our opinion, to gain exposure to the Jersey Oil & Gas investment opportunity.
Companies: Jersey Oil & Gas Plc
In H1, 2020 and the period directly following (Q3, 2020), EQTEC has made substantial operational progress, significantly boosting its project pipeline and strengthening its balance sheet with an over-subscribed £10m fund raising in July 2020. Revenue generation in H1, 2020, however, was constrained due to the impacts of Covid-19 and severe fires in California. We now forecast revenue of €2.4m in 2020E, compared with our previous forecast of €7.0m. Importantly, no projects have been cancelled. Delayed revenue is expected to flow into 2021E. Select new projects, having been secured in 2020, are expected to reach financial close in 2021E and 2022E, in addition to those existing projects under development in those years. As a result, we are increasing our 2021E and 2022E forecasts.
Companies: EQTEC Plc
H1 2020 results; progress on concept selection
Central Asia Metals (CAML LN) reported robust interim results in the context of the H1 2020 backdrop; solid production and the company’s fundamentally low cost base meant that CAML remained profitable despite the sharp pullback in commodity prices during the period which led to a 17% YoY decline in revenue to US$70.8m. Consequently, EBITDA was down 25% YoY to US$42.5m despite a decline in unit costs of 6% YoY at Kounrad and 9% YoY at Sasa to US$0.48/lb and US$0.43/lb respectively which cushioned the impact of the weaker the top line. With no significant one offs in the period, EPS of US$0.10/sh. was 33% lower YoY.
Companies: Central Asia Metals Plc
Another set of record results from Iofina, with H1 2020 benefiting from improved iodine pricing, solid cost controls and robust operational performance. Some of the shine will be taken off by the cautionary tone over the impact of COVID-19 on current iodine demand and pricing. Nevertheless, these results on top of the recent debt refinancing again demonstrate the continued improvements Iofina is delivering both operational and financially. It now has a solid platform of diversified low cost iodine production from five plants, a range of iodine and non-iodine specialty chemicals products, an improved balance sheet and a new lending partner with which to deliver its ‘prudent growth’ ambition.
Companies: Iofina Plc
Talitha Shelf Margin Deltaic LKA resource report
Companies: Pantheon Resources Plc
The stock was up 12% on Friday, 25/09, sparked by the positive outcome on Vodafone’s dispute with the Indian tax authorities. This is encouraging for Cairn, but note that both cases differ. While the tax authorities simply erased Vodafone’s tax bill, they owe up to $1.4bn to Cairn, and could offer more resistance.
Companies: Cairn Energy Plc
H1/20 has been a highly successful period for United Oil & Gas, during which time it has successfully transformed into a full-cycle E&P company. Key to this success has been the Abu Sennan acquisition, with net production increasing to 2,700boepd at the end of June. The significant production and reserve additions delivered as part of the 2019-20 drilling campaign emphasises the considerable upside that still remains in the block. Post period, United were granted a 100% operated working interest and an 18-month extension to the Walton-Morant licence, offshore Jamaica. At 229mmbbls, the Walton-Morant licence has the potential to have a major impact on United, which we value at US$724.3m or 76.8p/share unrisked. We update our valuation, increasing our price target to 19.1p/share, a 549% premium to the current share price and reiterate our BUY recommendation.
Companies: United Oil & Gas Plc
Adriatic Metals* (ADT1 LN) – Annual results and review of exploration | AfriTin (ATM LN) –– H1 report highlights production ramp-up at the Uis mine | Ariana Resources* (AAU LN) – US$30m partial disposal of Turkish Assets | Anglo Asian Mining* (AAZ LN) – BUY – Gedabek continue unaffected by the Nagorno-Karabakh conflict | Cornish Lithium (Private) - Cornish Lithium looking to bring the EV supply chain closer to home | IronRidge Resources* (IRR LN) – FY20 results: well positioned to continue de-risking portfolio projects with A$7.3m in the bank | Kavango Resources (KAV LN) – Resuming field exploration of the Kalahari Copper Belt, Botswana | Power Metal Resources (POW LN) – Exploration gets underway on Botswana joint-venture | Rambler Metals and Mining* (RMM LN) – Interims and refinancing of debt and planned restoration of mine production at higher copper grade | Renascor Resources (RNU AU) – Offtake agreement with Chinese anode manufacturer highlights China’s dominance of supply chain | Trans-Siberian Gold (TSG LN) – 8c interim dividend declared reflecting robust FCF and strong outlook | Versarien* (VRS LN) – New Advisory Panel brings together global leaders in graphene within Versarien
Companies: ADT1 ATM AAU AAZ IRR KAV POW RMM RNU TSG VRS
EQTEC announced (last Friday afternoon) an extension of the exclusivity period of the Billingham MOU until 22 November 2020. The extension of the MOU exclusivity period is with the aim of finishing the preparation of a legally binding option agreement with Scot Bros. which, if agreed, will grant EQTEC and its partners the right, but not the obligation, to purchase the entire issued share capital of Billingham EFW Limited (the project SPV) from Scott Bros. subject to an agreement on consideration and other terms.
West Newton B-1 drilling update
Companies: Union Jack Oil Plc
Chariot’s interims represent something of a line in the sand for the new management team, with historic oil-focussed deepwater exploration spend written-off, demonstrating its recent corporate and strategic ‘reboot’, which has ushered in a more entrepreneurial approach. Strategy has shifted away from higher-risk frontier exploration in favour of opportunities that better fit the energy transition. With the annual cash burn cut 45% to US$2.5m, no remaining work commitments and period-end cash of US$5.8m, management has a clear path ahead to deliver on its ambitions.
Companies: Chariot Oil & Gas Ltd.
Hargreaves’ FY20 results are very solid indeed. As previously reported, the only noticeable impact from COVID was in the slippage of Blindwells’ land sales, which were due to conclude during the lockdown period. Site activity has resumed and sales remain on track to conclude in the current year. A final dividend of 4.5p has been declared and the outlook statement is measured but confident. We reintroduce forecasts today, effectively reinstating our pre-COVID expectations. Hargreaves is well positioned to deliver a period of significant, renewed growth with the prospect of a double digit dividend yield from FY22 as HRMS profits are distributed.
Companies: Hargreaves Services Plc
Ready to steppe it up – initiating coverage
Companies: Enwell Energy Plc
Despite a lack of update on the Indian tax dispute (with the panel expecting to give an award after the end of the summer), the results are decent. Production averaged 22.4kboed, at the higher end of the 19-23kbpd guidance and the full-year guidance is also raised to 21-23kbpd. The sale of Senegal to Woodside has been approved by shareholders and remains subject to government approval.