Reports 2Q19 results
Leucrotta announced second quarter financial and operating results which were in line to slightly behind GMPFE and consensus expectations (AFFO $0.01 vs. GMPFE $0.01 vs. consensus $0.01). Leucrotta invested ~$3 mm in the quarter, surpassing both GMPFE and consensus estimates of $0.00 mm and $1.65 mm, with the lion’s share of the expenditure being directed towards an infrastructure acquisition in the Two Rivers operating area. We have taken capex down in both 2019e and 2020e as management conveys conservation of capital and the preservation of a positive working capital position.
28 Aug 19
Reports 2018 reserve book
Leucrotta announced its 2018 reserve results, which is similar to prior years. Conversion of resource to tangible production and cash flow continues to be secondary to preservation/expansion of large resource footprint, and the careful delineation of acreage position. As such, PDP based performance measures are underwhelming, undeveloped 1P/2P categories are better, though will still trial its peers to a degree in some efficiency aspects.
08 Mar 19
Reports 3Q18 results, activity to slow with adherence to cash flow budget ahead
Leucrotta announced financial and operating results slightly behind our forecast, with lower liquids production, higher differentials and royalties cresting above a lower unit cash cost element which was a positive.
28 Nov 18
FLASH: Positive initial result from Upper Montney well
This morning, LXE announced the initial results of its 10-08 Upper Montney well at Two Rivers. The well was cleaned-up over a ten day period and on the last day recorded a rate of 1,842 boe/d, which included 685 b/d (42 degree light oil), 5.6 mmcf/d of natural gas (1.3% H2S) and an estimated 224 b/d of recoverable NGL’s. Management noted that the well was also producing significant water and frac fluid during the test period which was expected for the Upper Montney in the region.
18 Jun 18
First quarter results ahead of expectations
LXE reported average 1Q18 production of 4,180 boe/d (27% liquids), which was comfortably ahead of the GMPFE estimate of ~3,567 boe/d which management attributed to flush production during the quarter. Production volumes were up ~10% QoQ. Cash flow of $6.4 mm ($0.03/share) was also ahead of our estimate of $3.3mm ($0.02/share) due to higher production and lower than forecasted operating costs. The company also had royalty credits that resulted in no royalties paid during 1Q18. During the quarter, LXE spent $11.5 mm net largely on DCT&E, which was in line with our forecast of $12 mm. As of quarter-end, LXE had $13.6 mm in cash and working capital and an undrawn $20 mm credit facility. Between the available working capital, credit facility and estimated 18e cash flow, LXE has enough capital to execute its 2018e capital program. Looking forward, LXE expects production in 2Q18 to be impacted by ~500 boe/d (shut-ins and maintenance) and the company reiterated its 2018 average production guidance of 3,600 boe/d (in line with GMPFE). We have updated our model to reflect the quarterly results. With an implied 26% return, we continue to have a BUY rating on Leucrotta.
30 May 18
No surprises from year-end results
LXE reported average 4Q17 production of 3,802 boe/d (34% liquids). This was in line with pre-released volumes of ~3,802 boe/d (when reserves were released) and production volumes are up ~22% QoQ. Cash flow of $4.5mm ($0.02/share) was ahead of our estimate of $3.3mm ($0.02/share) due to higher liquids production and lower than forecasted operating and transportation costs.
25 Apr 18
Drilling at Doe/Mica results in higher y/y reserve bookings
Reserves were up 258% y/y on a PDP basis to 4.6mmboe, 47% on a 1P basis to 15.1mmboe and 63% on a 2P basis to 37.1mmboe. Increased bookings were due to ongoing delineation drilling on its Doe/Mica Montney core area and higher per well bookings (Lower Montney Turbidite oil window moved from 650mboe to 855mboe). Based on managements stated 4Q17 production volumes of 3,802 boe/d, this represents a 1P RLI of 10.8 years and a 2P RLI of 26.7 years. We calculate 2P Future Development Costs of $167.6mm, which is ~13x Leucrotta’s 2018e estimated cash flow of $12.6mm (strip). Based off total spending this resulted in 1P FD&A costs of $19.61/boe and 2P FD&A costs of $10.67/boe, including FDC. This drives recycle ratios of 0.4x 1P and 0.8x 2P based on a 2017e cash flow netback of $8.13/boe. We have updated our model and NAV to reflect the reserve report and operations update. With an implied 47% return, we continue to have a BUY rating on Leucrotta.
27 Feb 18
Update on Lower Montney drilling activities
The 9-33 oil well was drilled and completed late last year using 51 fracs compared to the previous design of 28 fracs. The well had a reported IP30 rate of 1,351 boe/d (45%), which is 131% above type curve and well ahead of previous Lower Montney Turbidite wells. Management also stated that its 4-12 liquids-rich gas well that was completed using 49 fracs had an IP90 rate of 685 boe/d (30% liquids), which is tracking below type curve of 845 boe/d (30% liquids). This was largely attributed to a mechanical failure during completion that resulted in a material number of fracs being ineffective. Management believes only about 20 of the fracs were contributing. In 2018, the company will focus on delineation and well productivity. As a result, the company will drill 2 vertical wells to confirm Turbidite reservoir and 3 – 4 Hz wells to extend the proven productivity of the Lower Montney Turbidite play over LXE lands. As at 2017YE LXE had an estimated ~$19mm in positive working capital and an undrawn $20mm credit facility. Management expects to complete its 2018 capital program with cash flow and cash on hand. We have updated our model to reflect the operations update. With an implied 30% return we continue to have a BUY rating on LXE.
23 Jan 18
No surprises from 3Q17 results
LXE reported average 3Q17 production of 3,123 boe/d (27% liquids). This was in line with pre-released volumes of ~3,000 boe/d and production volumes are up ~19% QoQ. Management continues to expect volumes to rise and forecasts 4Q17 average production of 3,600 boe/d (30% liquids) vs previous GMPFE forecasts at 3,369 boe/d (28% liquids) and the street at 3,280 boe/d. CFPS (f.d.) of $0.01/share was slightly ahead of our estimate of $0.00/share due to lower than forecasted operating and transportation costs. However, reported 3Q cash flow was in line with the street estimates of $0.01/share. During the quarter, LXE spent $16.3 mm largely on DCT&E, which was in line with our forecast of $15 mm. As at Sept 30, 2017, LXE has $29.2 mm in cash and working capital (previously stated ~$28 mm) and an undrawn $20 mm credit facility. Management estimates that it will have ~$18 mm in positive working capital at year-end (previously stated ~$20 mm) and an undrawn bank line. We have updated our model to reflect 3Q17 results and 4Q17 production guidance. With an implied 25% return, we continue to have a BUY rating on LXE.
29 Nov 17
3Q17 preview and operations update
This morning, Leucrotta released a Fall operations update focused on its ongoing Montney activity. The biggest news item from the release was an update on longer-term production data from its A8-22 Lower Montney well. This well had an IP90 rate of 838 boe/d (40% oil & liquids). Given that A8-22 has both a higher IP90 rate (type curve of 521 boe/d) and a shallower decline (IP30 was 996 boe/d), we view these results as encouraging. 3Q17 production of ~3,000 boe/d (27% liquids) is largely in line with GMPFE estimates of 2,869 boe/d (28% liquids) and the street at 2,809 boe/d (29% liquids). Currently, LXE is producing around 3,200 boe/d however, management expects volumes to rise through 4Q17. As at September 30, 2017, the company estimates it has $28 mm in cash and working capital and an undrawn $20 mm credit facility. Management estimates that at year-end it will have ~$20mm in working capital (vs GMPFEe of $21mm) and an undrawn bank line. We have made some minor changes to our RENAV (from $2.21/sh to $2.54/sh) to account for this morning’s press release. We still consider our NAV assumptions conservative since over time LXE will have the opportunity to: 1) lower well costs using pad drilling and 2) decrease risk through successful delineation drilling. We have also updated our model to reflect 3Q17 financial and operating results.
24 Oct 17
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.
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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.
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23 Jun 16
Reports 1Q16 Results
Leucrotta’s first quarter results came in as expected, with little to no new operational information embedded in the release. Recall, during the period the Company announced encouraging results from its 8-22 light oil well at Mica along with a successful liquids-rich delineation well at East Doe, both in the Lower Montney turbidite play. With no material changes to our forecast, we have maintained both our Outperform ranking and target price of $2.00 per share.
27 May 16
Reports Year-End Results
Leucrotta’s year-end results carried few surprises, with both financial results and reserve bookings in line to slightly ahead of expectations. Reserves were down in all categories y/y reflecting the sale of a portion of the Company’s Montney land holdings in May 2015 that brought in proceeds of ~$79 mm. Recall, Leucrotta recently announced a strong test rate from its latest Montney light oil well that extends the oil window of the Company’s emerging Lower Montney Turbidite play. We have updated our NAV methodology for the year-end reserves, the result of which forms the basis for our revised target price of $2.00 per share. We maintain our Outperform ranking and would continue to buy the stock here.
28 Apr 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
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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.
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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.
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24 Mar 16
Provides Montney Update, Further Defines Oil Window
Leucrotta announced a strong test rate from its latest Montney light oil well that extends the oil window of the Company’s emerging Lower Montney Turbidite play, and coupled with new geological mapping of the oil pool, helps to prove up a significant light oil resource on Leucrotta’s lands. This emerging light oil play mapped across the Company’s central lands in the greater Dawson-Doe area, provides a nice complement to Leucrotta’s existing Montney liquids-rich natural gas play across the southern portion of its lands in the Doe area. We view this latest result as further confirmation of the considerable resource in place across the Company’s 193 (177 net) sections of Montney land. We have updated our NAV methodology, adding a preliminary light oil type curve, which forms the basis for our revised target price of $1.75 per share. We maintain our Outperform ranking and would buy the stock here.
03 Mar 16
PROVIDES UPDATE ON MONTNEY PROJECTS
Impact - positive with the Company announcing a strong test rate from its latest Montney light oil well that extends the oil window of the Company's emerging Lower Montney Turbidite play, and coupled with new geological mapping of the oil pool helps to prove up a significant light oil resource on Leucrotta's lands
29 Feb 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.
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08 Feb 16
LEUCROTTA EXPLORATION INC. (LXE) INCREASES LIQUIDS-RICH MONTNEY DEVELOPMENT INVENTORY
Impact - positive as the Company has materially expanded its drilling inventory through its delineation efforts and recent land acquisitions adjacent to its successful 13-19 well. Leucrotta announced that through its successful delineation drilling program coupled with recent land acquisitions, the Company has increased its Lower Montney Turbidite development drilling inventory to 160 (128 net) locations from 78 (70 net) locations previously. The newly acquired lands are adjacent to its recently announced 13-19 well that tested at 1,290 boe/d (6.8 mmcf/d of natural gas plus 160 bbl/d of free condensate). In addition, in December the Company brought its most recent Doe well on stream with the well posting an IP30 of 890 boe/d and production of 780 boe/d at the end of the 30 day period, which is reasonably consistent with the prior well in the area.
27 Jan 16
Leucrotta Reports Strong Test Rate from First Lower Montney Turbidite Well
Leucrotta has reported its test result from the first step-out Lower Montney well of its 3 well winter program with production rates well ahead of Management’s expectations at 6.8 mmcf/d of natural gas plus 160 bbl/d of free condensate (or ~1,290 boe/d) which has helped to prove up an ~20 well drilling inventory.
17 Dec 15
LEUCROTTA EXPLORATION INC. (LXE) REPORTS STRONG TEST RATE FROM FIRST LOWER MONTNEY TURBIDITE WELL
Impact: Positive. Initial test results from Leucrotta's first step-out well testing the Lower Montney are strong and have helped to prove up an ~20 well drilling inventory. Leucrotta has announced that its first Lower Montney Turbidite delineation well at 08-22-81-14W6 has tested at a rate of 6.8 mmcf/d of natural gas plus 160 bbl/d of free condensate for a combined rate of 1,290 boe/d, significantly exceeding Management's expectations. Based on internal mapping, the Company has identified up to 20 locations offsetting this well.
16 Dec 15
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.
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14 Dec 15
Leucrotta Exploration Announces 3Q15 Results, Montney Well Results to be Released in December
Leucrotta’s 3Q15 financial results were generally consistent with our thinking for the quarter despite ongoing 3rd party curtailments that continued to restrict corporate production levels and materially impact realized pricing. In the context of the asset sale announced in May, we view the quarter largely as a non-event as the Company continues to work towards delineating its material footprint in the Montney.
26 Nov 15
LEUCROTTA EXPLORATION INC. (LXE) Q3 2015 FINANCIAL AND OPERATING RESULTS
Impact: Neutral. Leucrotta's 3Q15 financial results were generally consistent with our thinking for the quarter despite ongoing 3rd party curtailments that continued to restrict corporate production levels.
25 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.
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23 Oct 15
INTERMEDIATES, MID CAPS & SMALL CAPS- Intermediates, Mid Caps & Small Caps: New Commodity Price Outlook Impact & 2017 Estimates Rollout
With this publication we are formally rolling out our 2017e forecasts for the Intermediate, Mid, and Small Cap groups, which accompanies our regularly scheduled crude oil and natural gas price forecast update. Less than a month removed from making major revisions to our crude oil price outlook in an interim update, this time around only minor changes to our commodity price outlook have been noted, leaving our initial glimpse into 2017e forecasts as the main takeaway in this publication.
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28 Sep 15
LEUCROTTA EXPLORATION INC. (LXE) COMMENCES MONTNEY DRILLING PROGRAM, PROVIDES FURTHER DETAILS ON WINTER DEVELOPMENT PROGRAM
Impact: Neutral. Leucrotta has provided further granularity for its previously announced winter development plans which will see 3x Lower Montney wells drilled by year-end and 3x of its previously drilled and tested Montney wells tied-in by the end of 1Q16e.
17 Sep 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.
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31 Aug 15
Leucrotta Exploration Reports 2Q15 Financial Results, Outlines Conservative Capital Spending Plans to 1Q16e
Given Leucrotta’s previously announced Montney disposition as detailed in our Facts dated May 29, 2015, we view the Company’s 2Q15 financial results as essentially a non-event.
27 Aug 15
LEUCROTTA EXPLORATION INC. (LXE) REPORTS 2Q15 FINANCIAL RESULTS, OUTLINES CONSERVATIVE CAPITAL SPENDING PLANS TO 1Q16E
Impact: Neutral. Although Leucrotta's conservative $20 mm capital spending plan for the balance of 2015e and into 1Q16e will see our production and cash flow estimates fall from current levels, we view this budget as prudent in light of a weakening commodity environment and further note ample working capital which the Company could use to accelerate development at its Montney and Stoddart properties should commodity pricing permit. Given Leucrotta's previously announced Montney disposition including 1,300 boe/d, we view the Company's 2Q15 financial results as essentially a non-event.
26 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.
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20 Aug 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.
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23 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.
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25 Jun 15
Leucrotta Exploration Announces Disposition of NE BC Montney Acreage, Outlines Accelerated Montney Exploration and Delineation Program, Reports 1Q15 Results
Leucrotta reported its first quarter results that quickly became a non-event in light of a subsequent announcement that the Company had sold off a portion of its NE BC landholdings for cash proceeds of ~$80 mm. In terms of the first quarter results, there were no surprises as results were consistent with our forecast on a production, cash flow and capital expenditure basis.
29 May 15
LEUCROTTA EXPLORATION INC. (LXE) SELLS A PORTION OF ITS NE BC MONTNEY ACREAGE
Impact: Positive. Total proceeds of $80 mm from this transaction will provide ample funding for Leucrotta to pursue a number of its Montney development and exploration drilling initiatives throughout the balance of this year and into 2016e, all while retaining a meaningful prospective Montney land base of 172 net sections offsetting its recent light oil discovery at Mica as well as its original Lower Montney discovery well at Doe.
28 May 15
LEUCROTTA EXPLORATION INC. (LXE) ANNOUNCES 1Q15 FINANCIAL AND OPERATING RESULTS
Impact: Neutral. Leucrotta's 1Q15 financial results were consistent with our forecast on a production, cash flow and capital expenditure basis. Additionally, no new operational news or formal guidance was provided as part of the update.
27 May 15