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GREENFIELDS PETROLEUM
Greenfield Petroleum (GNF CN) (not covered): 3Q18 results | San Leon Energy (SLE LN) (not covered): Payment in Nigeria
GREENFIELDS PETROLEUM San Leon Energy Plc
Valeura Energy (VLE CN)1,6; BUY, C$10.00: Year-end 2017 results and continued focus on the deep basin centered gas accumulation | Greenfields Petroleum (GNF CN)8 ; Discontinuing research coverage | SDX Energy (SDX LN/CN)1,6: 4Q17 results | Savannah Petroleum (SAVP LN) (not covered): FY17 results
GNF SAVE SDX 83PN
We are discontinuing research coverage of Greenfields Petroleum, due to a reallocated of analyst resources. All prior production and financial estimates, as well as research ratings and target prices must no longer be relied upon.
Greenfield recently reported that its 1P reserves increased 51% to 37 mmboe, 2P reserves increased 33% to 53 mmboe, and 3P reserves increased 24% to 66 mmboe. The increase reverse booked also include a significant increase in future development capital to US$211 mm on 1P reserves, US$274 mm on 2P reserves, and US$329 mm on 3P reserves. In order to fund the future development capital, Greenfields will require external sources of financing. We have estimated the dilution and have reduced our target price to C$0.25 per share.
Houston-based Greenfields Petroleum acquires interests in undeveloped oil and gas fields overseas. Following the collapse of the Soviet Union, Azerbaijan offered up its best oil and gas projects to international companies. GNF now has an 80% stake in the impressive Bahar Project. It is a very good address, home to billion-barrel oil and multi-trillion cubic feet gas projects proved up by neighbours including BP and Total.
Greenfields recently reported 3Q17 results, with production of 3,223 boe/d that was below expectations, due to limited capital investment throughout 2017e. In partnership with Vitol, Greenfields has built dynamic reservoir models that have identified waterflood development opportunities that will be the near-term priority for the company. We have reduced our 2018e production outlook significantly, due to the limited workover and recompletion program, as well as uncertainty over when there will be a production response from the planned waterflood program.
Event: Greenfields restructures senior secured debt, thereby creating financial flexibility to advance capital program in 2018e
Greenfields Petroleum (GNF CN); SPECULATIVE BUY, C$1.00: reports 3Q16 results
We had an opportunity to host Mr. John Harkins, CEO of Greenfields, for a corporate presentation. Greenfields completed the acquisition of its defaulted partner, Baghlan, of August 9, 2016 and the corporate restructuring was settled on August 18, 2016. Post corporate restructuring, Greenfields has senior secured debt of US$44 mm that matures on March 31, 2018 that will potentially be refinanced in the upcoming months and a share count of 157 mm shares. We previously anticipated a share count of 166 mm shares; therefore, this is 5% less dilution than expected. Our core NAV estimate is $0.47 per share and our risked NAV estimate is $1.40 per share.
Greenfields’ corporate restructuring process continues, with the expectation of a successful conclusion by the end of September 2016. Operational activity has increased, with six workover rigs in operation at the Bahar Gas Field and Gum Deniz Oil Field. There has been a positive production response and q/q production growth is now expected throughout 2016e and 2017e. Greenfields reported 2Q16 production results that were in line with our expectations. Gross field production was 3,798 boe/d, while the Company’s entitlement volumes were 1,065 boe/d.
Greenfields reported 1Q16 field production of 4,033 boe/d (1,053 boe/d net) and cash flow of negative US$2 mm. Results were modestly lower than expected, but inconsequential when compared to the Baghlan acquisition and corporate restructuring that is expected to close imminently.
Greenfields reported 4Q15 production results that were better than expected. At the field level, production was 4,428 boe/d (FCC 4,125 boe/d). Net to Greenfields,production was 1,178 boe/d (FCC 1,100 boe/d). The Company’s 4Q15 results are secondary to the proposed consolidation of Bahar Energy (33.3% WI to 100% WI) and restructuring plan, which is expected to close in May 2016e. Please refer to our report, Greenfields Petroleum (GNF) Consolidates Its Interest and Announces Restructuring Transaction. Our outlook for 2016e and 2017e remains unchanged.
Impact: Neutral. Greenfields has announced it has entered into an agreement with Heaney Assets Corp. to settle all outstanding debt under its subordinated revolving loan agreement, dated June 27, 2014. Under the agreement, Greenfields will issue 11.5 mm shares to Heaney which fully satisfies all amounts outstanding under the original loan agreement, including principal in the amount of US$20.8 mm and accrued interest. Greenfields will also pay US$1 mm plus 0.5 mm shares to an agent for successfully negotiating the terms of the agreement. The share issuance will come from the 160 mm share target proposed from the share restructuring.
Greenfields recently announced that the Company has consolidated its interest in Bahar Energy Limited, which is the operating entity of the Company’s project in Azerbaijan. The transaction removes the defaulted partner, Baghlan. We view this transaction positively. In combination with the consolidation, Greenfields has announced a restructuring plan to convert the debentures and senior loans to equity. This dilution was anticipated and will ensure the Company’s survival, and therefore, should be viewed positively as the alternative was the risk of default.
Market Impact: Positive. Greenfields has consolidated its interest in Bahar Energy Limited, which is the operating entity of the Company's project in Azerbaijan. This is positive, as transaction removes the defaulted partner, Baghlan. In combination with the consolidation, Greenfields has announced a restructuring plan to convert the debentures and senior loans to equity. This dilution was anticipated and will ensure the Company's survival, and therefore, should be viewed positively, as the alternative was the risk of default.
Trilogy Energy Corp. (TET) | Greenfields Petroleum Corporation (GNF) | Pembina Pipeline Corporation (PPL) | Tidewater Midstream and Infrastructure Ltd. (TWM)
GNF PPL TWM TET
Greenfields reported 3Q15 production that was better than anticipated at 1,273 boe/d, versus FirstEnergy’s outlook of 1,106 boe/d. Cash flow was in line with expectations. The third quarter results are secondary to the importance of a qualified third party replacing Greenfields’ partner, Baghlan, at which point Greenfields can collect approximately US$26 mm in funds that were used to carry Baghlan’s financial obligations and the project can once again proceed with development and exploration.
Market Impact: Neutral. Greenfields reported 3Q15 production that was better than anticipated at 1,273 boe/d, versus FirstEnergy's outlook of 1,106 boe/d. The third quarter results are secondary to the importance of a qualified third party replacing Greenfields' partner, Baghlan, at which point Greenfields can collect approximately US$26 mm in funds that were used to carry Baghlan's financial obligations and the project can once again proceed with development and exploration.
We are resuming research coverage on Greenfields Petroleum from the FirstEnergy Calgary office. Greenfields is currently in the process of replacing its insolvent partner, Baghlan, and we are under the impression that the process is well advanced. Upon closing of the transaction, we expect Greenfields to be reimbursed in the amount of approximately US$25 mm for costs incurred to fund Baghlan’s interest to continue to advance the project.
Market Impact: Positive. SOCAR has confirmed that Greenfields, and its operating company Bahar Energy Operating Company, have fulfilled its obligations of achieving Target Production Rate 1 (TPR1), as per the terms of the exploration, rehabilitation and development production sharing agreement. Greenfields has also achieved TPR2, in which SOCAR is now responsible for its 20% WI costs going forward, although formal acknowledgement has not yet been received.
Market Reaction: Positive, as this buys Greenfields some more time to see the replacement of Baghlan, in the Bahar Energy JV, resolved.
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