Deleveraging strategy continues to shine through low declines and significant FCF
Production of 20,407 boe/d was in line with both GMPFE and consensus estimates of 20,312 boe/d and 20,530 boe/d, respectively, as the company largely kept production flat due to the Alberta production curtailments.
10 May 19
4Q18 Production and funds flow as expected, impairment reversal positive for earnings
Production of 20,365 boe/d (87% liquids) was in line with expectations as it was discussed previously in the 2018 reserve update earlier this month. (HYPERLINK to our Comment dated March 7)
20 Mar 19
2019e guidance focused on debt repayment, opex improvements and possible dividend lift
Cardinal has unveiled its 2019e capital budget, one which sees the company investing $47mm to maintain volumes between 20,400- 20,800 boe/d, which remains consistent with the level mandated by the current Alberta curtailments. Management anticipates excess cash generation of $29 -$39 mm beyond capex and current dividend payouts, with which it will prioritize debt repayment, operating efficiencies and dividend sustainability ahead.
01 Mar 19
3Q18 results modestly behind, bumpy 4Q18e expected before turnaround in 2019e
Production of 20,949 boe/d (87% liquids) was reasonably in line with both GMPFE and consensus estimates of 21,522 boe/d and 21,280 boe/d, respectively. Funds flow of ~$27.1 mm was shy, albeit in a minor fashion, of both GMPFE and consensus expectations of ~$28.7 mm and ~$30 mm, respectively.
02 Nov 18
Announces 4Q17 results and 2017 reserve book
Cardinal announced 4Q17 results which were generally in line with expectations, as production of 20,948 boe/d and funds flow of $28.6 mm, or $0.26/sh, largely tracked GMP FE and consensus estimates. While full reserve disclosures have not been provided as of yet, FD&A and F&D performance markers of $10.76/boe and $12.67/boe were disclosed, signalling attractive additions costs focused on light oil assets. There were no further updates surrounding further asset dispositions beyond the $24 mm in sales announced February 28th .
22 Mar 18
Tops Estimates in 2Q16, Guidance Increased for 2H16e
Cardinal’s 2Q16e production was 3% ahead of our forecast while CFPS also beat by 19% (or 13% higher than consensus). Management is increasing its base 2016e capital budget by $10 mm (to $35 mm) which, in combination with an expanded Bantry program after continued success, will drive 4Q16e volumes of 15,100 boe/d which improves by 3% over the prior guidance. In June the Company’s LMR was 1.69 and was subsequently increased to 1.75 in July at no cost. With a modest increase to its abandonment budget the LMR is expected to increase to 1.90 by year-end. We are reaffirming our Top Pick ranking with an unchanged target price of $13.50 per share.
03 Aug 16
2Q16e Quarterly Preview
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.
CJ AAV ARX BTE BNP CPG ERF POU PEY PGF PWT PSK VII TOU VET WCP BNE 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
26 Jul 16
Intermediates, Mid Caps & Small Cap Commodity Price Update
With this publication we highlight forecast revisions associated with our commodity price update (Natural Gas Update; Crude Oil Update), reaffirming a view of commodity price recovery in 2017e. In the interim until then, 2016e Canadian oil price realizations are up ~11% in the synthetic and Edmonton Light streams, with heavy WCS crude up ~20% which is amplified by Canadian oilsands output curtailments. While 2016e Canadian natural gas prices are projected to be ~20% lower, we expect much of this effect to be mitigated by strong hedging positions this year, and remain focused on price recovery next year with very strong increases reflected in both the strip and our revised forecast. Overall, broad valuations are flat to slightly higher coming out of this exercise, with oil/ liquids levered entities observing the highest 2017e CFO uptick. We remain constructive on the space, though the market will need to look past a trough of potentially weak pricing this summer.
CJ ARX CPG ERF TOU POU PPY SRX LXE
23 Jun 16
Cardinal Energy Bolsters Balance Sheet with $67 mm Equity Financing
We are updating our estimates after coming off research restriction following our participation in Cardinal’s $67 mm equity financing, wherein the Company issued 7.15 mm shares at $9.35 per share. Post-financing, Cardinal solidifies an already peer group leading balance sheet and sustainability outlook, which will enable the Company to expand opportunities in its core operating areas through opportunistic tuck-in acquisitions while continuing to advance both organic growth efforts and pursue larger A&D transactions. Reaffirming our view that Cardinal remains one of the best positioned companies to benefit from a dynamic crude oil price quote, we reinstate our Top Pick ranking on an unchanged target price of $12.50 per share.
16 Jun 16
1Q16 Results Match Expectations
Cardinal’s 1Q16 volumes of 14,245 boe/d overlaid our estimates while CFPS of $0.12 was ahead of our call of $0.10 and inline with consensus at $0.12 per share. Strong operational performance saw the Company, once again, reduce operating costs with 1Q16 figures coming in >$2.00/boe lower than those reported in 4Q15 when they acquired the Mitsue assets. The Company continues layering in hedges to protect its capital program and dividend payout, helping to solidify Cardinal as the most sustainable companies in our domestic Junior E&P yield space.
04 May 16
Intermediates, Mid Caps & Small Caps
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
CJ AAV ARX BTE BNP CPG ERF POU PEY PGF PSK VII TOU VET WCP BNE 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
26 Apr 16
Domestic E&P Statistical Package and FD&A Review
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.
CJ AAV ARX BTE BNP CPG ERF POU PEY PGF PWT VII TXP VET WCP BNE 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
12 Apr 16
Intermediates, Mid Caps & Small Cap Commodity Price Update
With this publication we highlight forecast revisions associated with our commodity price update (Natural Gas Update; Crude Oil Update), roughly characterized by near term lifts in crude oil prices concurrent with a reduction to portended 2016e and 2017e natural gas pricing outlooks. While there are a few ranking changes on mostly non-material moves to valuations, implied returns within the group on the whole are far less than postulated only a few months ago, reflective of resurgent equity prices on what was previously an oversold market. Details of the Alberta royalty review should arrive in the following weeks; hence the likelihood of subsequent forecast changes is likely.
CJ AAV ARX BNP CPG PEY VET BNE CR DEE KEL NVA PPY PMT LXE TVE
24 Mar 16
POSTS 2015 YEAR-END RESULTS
Impact: Neutral. Cardinal's 4Q15e production was in line with expectations while cash flow was behind on lower than anticipated realized pricing in a quarter where it began integrating the Mitsue acquisition. Reserve additions performance was strong with 20%+ per share growth in all key categories (PDP,1P,2P).
16 Mar 16
Posts 2015 Year-End Results
Cardinal’s 4Q15e production was in line with expectations while cash flow was behind on lower than anticipated realized pricing in a quarter where the Mitsue acquisition was being integrated. Reserve additions performance was strong with 20%+ per share growth in all key categories (PDP, 1P, 2P) while maintaining one of the most conservative reserve books in our domestic E&P universe. FD&A costs were also stout at $9.54/boe 2P, $11.99/boe 1P and $12.12/boe PDP. The Company added 42 new sections to its Bantry core during 4Q15, particularly encouraging with its 2015 Glauconite drilling program delivering average IP90 rates of 300 boe/d.
16 Mar 16
Intermediate/Mid/Small Cap Commodity Price Update Impact
With this publication we highlight forecast revisions associated with our crude oil commodity price update. Concurrent within a dynamic time for E&Ps, some of which have already begun the process of 2016 capital budget downdrafts, revised estimates attempt to directionally capture a shift towards capital conservation, though severely weakened futures curves have influenced our thinking for the better part of 6 months anyway. We expect further capital investment reductions forthcoming from E&Ps in the coming weeks.
CJ AAV ARX BNP CPG ERF POU PEY SPE SGY TVE TOG TOU VET GXE KEL NVA PPY BTE PGF PSK PWT VII WCP BNE CR DEE JOY LTS LRE PMT PNE RRX RMP SRX TET ATU BXO CKE IKM LXE MQL RE SKX TVL YGR YO ZAR
08 Feb 16
Survival of the Fittest
This publication serves to recap the chaotic changes that have happened since original 2016e budgets were disseminated, plus provide clarity on the names we believe will thrive, survive, or those that will be challenged to remain in this group for much longer.
CJ ARX CPG PEY WCP VET BNP BNE ERF SGY TOG
26 Jan 16
Cardinal Prudently Reshuffles Cash Outflows in 2016e with Guidance Update and Dividend Cut
The Company has chosen to reduce its 2016e capital budget from $35 mm to $25 mm while also trimming its monthly dividend by 50% to $0.035 per share in order to better match cash use to cash flow in today’s challenging oil price environment. Despite the 29% reduction in capital, the revised production guidance remains unchanged at 14,600 boe/d. Cardinal’s 2016e cash use to cash flow ratio (on the forward strip) improves dramatically from 244% to 114%, while similarly, the 2016e D/CF (trailing) outlook rallies from 5.5x to 3.2x. Based on the Company’s relatively heightened sensitivity to falling oil prices, we are reducing our target price to $11.00 per share while downgrading the stock to an Outperform ranking.
15 Jan 16
Moderate Risk, High Reward Within Top Ideas Portended for 2016
While a new year, a lot of our Top Ideas are old and familiar. We continue to believe the market will coalesce around low cost entities able to grow or at least maintain earnings power within a framework of capital conservation. While we continue to be optimistic surrounding elevated M&A activity, management teams and boards will be reluctant to sell at cyclical troughs, and as such do not believe the market will speculate on transactions despite some compelling asset prices reflected in equities right now (contingent of course on some aspect of commodity price recovery). Hence, going-concern business plans built to survive and thrive will be held in higher regard than NAV stories rich in potential energy and associated optionality yet tenuous in ability to create value in weak commodity prices within the absence of corporate bids. This is a familiar theme through much of 2015 on the E&P side. The near-term outlook for oilfield services continues to be bearish due to continued reductions in North American E&P capital spending on a y/y basis and early signs that announced spending may be weighted towards 2H16e. The stock prices for OFS companies will move before profitability begins to nudge higher, however, the duration of the downturn remains uncertain. Our view is unchanged in that taking positions in OFS companies with strong balance sheets, above average asset quality and disciplined management teams will reward patient, long-term investors. Near-term equity performance is likely to be very volatile. Some upside is to be realized by energy infrastructure names that are positioned to fund a growing dividend and those that can find a substantial tailwind with a potential oil price recovery.
CJ CNQ AAV ARX PEY TOU CPG WCP KEL PPY RRX SRX IAE PXT TLW SES ENB ENF
06 Jan 16
New Commodity Price Outlook Impact
“Worse? How could they get any worse? Take a look around you, Ellen. We’re at the threshold of hell”. These are the words spoken by Clark Gris-wold in the holiday classic “Christmas Vacation”, and seem aptly suited for the general sentiment in the Canadian energy space at the moment as we roll out a summary of our regular forecast revisions extending from our most recent crude oil and natural gas price forecast update.
CJ AAV ARX BTE BNP ERF POU PEY PGF PSK PWT VII TOU VET WCP BNE CR DEE JOY KEL LTS LRE NVA PPY PMT PNE RRX RMP SRX SGY TOG TET ATU BXO CKE GXE IKM LXE MQL RE SPE SKX TVE TVL YGR YO ZAR CPG
14 Dec 15
Cardinal Energy Ltd. (CJ) Generates Predictably Solid 3Q15 Results
Cardinal reported 3Q15 cash flow that was 40% higher than our forecast and 19% higher than consensus with continued operating and other cash cost efficiencies paired with better than anticipated realized crude oil pricing. Production of 11,220 boe/d was in line with our projections and delivered through a low risk capital program of ~$12 mm, highlighting the Company’s enviable quality of having low maintenance capital requirements, particularly in the challenging commodity price environment we are in today.
04 Nov 15
FirstEnergy - DAILY RESEARCH SUMMARY
Cardinal Energy Ltd. (CJ) Generates Predictably Solid 3Q15 Results | Lightstream Resources Ltd. (LTS) 3Q15 Estimates Slightly Ahead of Expectations | Pengrowth Energy Corporation (PGF) Third Quarter Results Largely As Expected | Faroe Petroleum Plc (FPM LN): Value Stock | LGO Energy Plc (LGO LN) Reduced Production Outlook and Financing Risk Results in Strategic Investment Process | Savanna Energy Services Corp. (SVY) Reports Stronger-Than-Expected 3Q15, Additional Asset Sales | AltaGas Ltd. (ALA) 3Q15 Results | Brookfield Renewable Energy Partners (BEP) Reports 3Q15, Missed Estimates, Maintain US$34.00 Target, Outperform
CJ LTS PGF FPM SVY CERP
04 Nov 15
CARDINAL ENERGY LTD. (CJ) ANNOUNCES 3Q15 RESULTS
Impact: Positive. Cardinal reported 3Q15 cash flow that came in materially above both our forecast and consensus as a result of stronger than expected realized prices and lower cash costs. Operationally, IP30 results from two wells drilled at Bantry in 3Q15 are trending well ahead of our type curve estimate.
03 Nov 15
INTERMEDIATES, MID CAPS & SMALL CAPS - 3Q15e Quarterly Preview
With this publication we briefly summarize our projections for 3Q15e quarterly results for our Junior E&P (Intermediate, Mid & Small Cap) coverage universe. Within the backdrop of continued weakness in the commodity price complex that saw the retrenchment of crude oil pricing during the quarter, after what was a short lived rally during the second quarter, we are anticipating yet another lacklustre reporting period in the Junior E&P space, with the key themes coming out of the quarter likely to be centered on further reductions to capital programs, ongoing takeaway capacity constraints, potential dividend cuts, reduced bank lines from fall credit reviews, continued weakness in the Station 2 and CREC natural gas price markers, and for some, the rollout of formal 2016e budgets.
CJ AAV ARX BTE BNP CPG ERF POU PEY PGF PWT PSK VII TOU TET VET WCP BNE CR DEE JOY KEL LTS LRE NVA PPY PMT PNE RRX RMP SRX SGY TOG ATU CKE GXE IKM LXE MQL RE SPE SKX TVE TVL YGR YO ZAR
23 Oct 15
Cardinal Acquiring High Quality Light Oil Assets at Mitsue and Related Financing
We have come off restriction following our participation in Cardinal’s recent equity financing, proceeds from which were used to partially fund the Company’s $129 mm (net) acquisition of a suite of mature light oil assets located in the Greater Mitsue region of central Alberta. The assets were acquired from Penn West Exploration (PWT-TSX) in a joint deal between Cardinal (75%) and a private junior E&P (25%).
07 Oct 15
First Energy Daily Global Research Summary
We have come off restriction following our participation in Cardinal’s recent equity financing, proceeds from which were used to partially fund the Company’s $129 mm (net) acquisition of a suite of mature light oil assets located in the Greater Mitsue region of central Alberta. The assets were acquired from Penn West Exploration (PWT-TSX) in a joint deal between Cardinal (75%) and a private junior E&P (25%). With Cardinal able to successfully execute a high quality transaction at attractive prices in what we would consider a commodity cycle trough, our forward estimates continue to frame a Company that is actually growing stronger despite a domestic E&P market that has been under pressure for over a year now. Further differentiating itself in this fashion has prompted us to reaffirm our Top Pick ranking on an increased target price of $16.50 per share (previously $15.00 per share).
Cardinal Energy Pengrowth Energy
07 Oct 15
INTERMEDIATES, MID CAPS & SMALL CAPS - Crude Oil Downdraft, Though Remain Far More Constructive Than Current Forward Strip Would Suggest
With this publication we highlight forecast revisions stemming from an interim commodity price update centered around the crude oil pricing complex. Moves for crude oil weighted producers are significant, with 2016e cash flows down 12%-15%, and portended NAVs reduced sizably on the employment of a materially lower terminal value within the scope of the forecast period, though not reflective of the potential attrition in E&D capital investment and dividend policy should the current forward strip come to fruition in the cash market.
CJ AAV BTE BNP CPG ERF POU PEY PGF PSK PWT VII TOU VET WCP BNE CR DEE JOY KEL LTS LRE NVA PPY PMT PNE RRX RMP SRX SGY TOG TET CKE GXE IKM LXE MQL RE SPE SKX TVE TVL YGR YO ZAR
31 Aug 15
Junior E&P 2Q15 Review
Within this publication we summarize changes to forward estimates coming off of the reporting of second quarter financial and operating results, highlighting equity price movements and a few valuation comparatives through to the end of 2016e.
CJ ARX BTE BNP CPG CR ERF LTS LRE POU PEY PGF PSK PWT VII TOU TET VET WCP AAV BNE DEE JOY KEL NVA PPY PMT RRX RMP SGY TOG CKE GXE IKM LXE MQL RE SPE PNE SRX SKX TVE TVL YGR YO
20 Aug 15
2Q15 Results Ahead of Expectations
With results released on the evening of July 27th, 2015, Cardinal Energy inaugurates 2Q15 earnings season for the junior E&P space, reporting production of 11,294 boe/d and cash flow of $29.9 mm or $0.51 per diluted share, both measures coming in ahead of our forecast ideally on E&D capital spending that was below our thinking.
28 Jul 15
CARDINAL ENERGY LTD. (CJ) ANNOUNCES 2Q15 RESULTS
Impact: Slightly Positive. Cardinal reported 2Q15 cash flow that came in slightly above our forecast but handily above consensus estimates. The Company also reported that costs on recent Bantry horizontal wells have come down by ~20% from our type curve assumption, further augmenting Cardinal's ability to maintain its position as the most sustainable dividend payer in its peer group.
28 Jul 15
INTERMEDIATES, MID CAPS & SMALL CAPS 2Q15e - Quarterly Preview
With this publication we briefly summarize our projections for 2Q15e quarterly results for our Junior E&P (Intermediate, Mid & Small Cap) coverage universe. In what could be viewed as the “Perfect Storm”, we are anticipating yet another weak reporting period in the Junior E&P space as continued deterioration of the commodity price complex will surely influence 2H15e capital investment plans, exacerbated by ongoing takeaway capacity constraints that have resulted in rolling shut-ins for many of the names that we cover, within the backdrop of an uncertain fiscal regime in Alberta in the interim. Typically the second quarter is already a relatively quiet period to begin with in terms of activity in the field due to the onset of spring breakup, though with most shuttering operations early in late February motivated in part to extract service cost deflation in a volatile pricing environment, activity specific to 2Q15e should be muted.
CJ ARX BTE BNP CPG CR ERF LTS LRE POU PEY PGF PWT VII TOU TET VET WCP AAV BNE DEE JOY KEL NVA PPY PMT RRX RMP SGY TOG CKE GXE IKM LXE MQL TOU PNE RE SPE SRX SKX TVE TVL YGR YO ZAR
23 Jul 15
CARDINAL ENERGY LTD. (CJ) ANNOUNCES $25 MM INCREASE TO CREDIT FACILITY
Impact: Slightly Positive as the increased facility and related borrowing base gives the Company further capacity to execute on its acquisitive growth strategy at a low point in the crude oil price cycle. Cardinal announced that, following a normal course review, its credit facility has been increased to $150 mm from $125 mm previously. The related borrowing base attached to the credit facility has also increased, moving to $300 mm from $220 mm. At its discretion, Cardinal can request an increase of its credit facility up to the borrowing base amount. With an estimated 2H15e spending plan of $15 mm coming in below forecasted free cash flow generation, we show Cardinal reducing leverage through the latter half of the year, exiting 2015e with ~$52 mm of net debt while posting positive debt-adjusted production per share growth on a 4Q15/4Q14 basis. We currently estimate the Company will exit 2Q15 with ~$63 mm of net debt, representing a peer group best 0.5x debt to 2Q15 annualized cash flow.
16 Jul 15
Rebalancing of Commodity Price Forecast Preserves Challenging Outlook for Broader Intermediate, Mid, Small Cap Sector: New Commodity Price Outlook Impact
With this publication we provide our regular forecast revisions stemming from our quarterly commodity price update for both the crude oil and natural gas pricing complex. All told, we see only modest moves in the near term to our pricing streams with our longer term view largely intact. Given the current state of commodity prices from an oversupply of both crude oil and natural gas, the kick off of summer, ongoing restrictions on TCPL’s NGTL system, and the recent election of an NDP majority government, we anticipate the market to trade sideways from here for the next few months until further certainty is obtained in the fall as to the direction of commodity prices along with any potential changes to the royalty structure in Alberta. We had anticipated to see an active M&A market by now that would pick up even further heading into the back half of the year, although in reality see this as somewhat sterilized until further clarity is obtained on the NDP’s energy policies.
CJ ARX PEY TOU VET WCP AAV BNE NVA PPY RRX PNE SPE SRX BNP LTS POU PGF VII TET SGY TOG TOU LXE RE TVE YO ZAR
25 Jun 15
CARDINAL ENERGY LTD. (CJ) MANAGEMENT UPDATE
We had the pleasure of hosting Mr. Scott Ratushny, CEO of Cardinal Energy, who provided an update on current operations and plans for the latter half of 2015. The Company is currently finishing up a 4 well D&C program, which commenced earlier in 2Q15, focused on the Glauc at Bantry. Of the 4 wells in the program, 2 have been placed on production, 1 is currently flowing back frac fluid while the final well is scheduled for imminent MSF treatment.
27 May 15
Cardinal Energy Quietly Posts Strong 1Q15 Results
Despite spending less than $3.0 mm and drilling zero wells, Cardinal generated a strong quarter of operations as production managed to grow q/q while operating expenses dropped 10% (~$2.50/boe) over levels observed in 4Q14, all helping it to match our cash flow expectations at ~$22.0 mm ($0.38 per share) and beating consensus forecast of $0.36 per share.
12 May 15