Receives Initial Order for CCAA Protection
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.
29 Sep 16
ANNOUNCES INITIATION OF CCAA SALES PROCESS AFTER RECAPITALIZATION PROPOSAL FAILS TO PROCEED
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.
19 Sep 16
Reports 2Q16 Results
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.
08 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.
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26 Jul 16
Proposed Recapitalization Transaction
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.
14 Jul 16
ANNOUNCES DEFERRAL OF INTEREST PAYMENTS ON SECOND LIEN NOTES
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.
15 Jun 16
Announces 1Q16 Results, Overshadowed by 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.
05 May 16
Lightstream’s Credit Facility Falls 55%, Currently Overdrawn
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.
03 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
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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
Reports Year-End 2015 Operational and Financial Results
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.
07 Mar 16
Lightstream Announces Poor 2015 Reserve Performance, Negative CF Expected in 1H16e
Lightstream’s reserves rolled back y/y by 17%, 13%, and 12% per share on a PDP, 1P, and 2P basis. Commensurate F&D, FD&A, and recycle ratio performance markers will trail the industry average by a sizable margin. Updated CNAV forecasts point to a negative value on both FCC and forward strip pricing scenarios. 1H16e capital budget of $16 mm and production estimate of 25,000 – 25,500 boe/d trailed our prior forecast of $10 mm and ~26,200 boe/d. With Management’s outlook on crude prices averaging ~ US$35.00/bbl for the first half of the year, commensurate cash flow is expected to be negative, at -$22 mm.
12 Feb 16
LIGHTSTREAM RESOURCES LTD. (LTS) ANNOUNCES 2015 YEAR-END RESERVES AND 1H16 GUIDANCE
Impact: Negative. Lower reserves and associated NPVs will pressure the stock given a pending bank line review on April 30, 2016. Despite a minimal capital spending program in 1H16, cash flow is expected to be negative, further exacerbating the Company's liquidity issues.
11 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
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
3Q15 Estimates Slightly Ahead of Expectations
Lightstream announced third quarter 2015 results which were in line on a production basis but beat us on cash flow due primarily to lower than anticipated operating costs. Production for 3Q15 was 30,255 boe/d weighted 71% to oil and NGLs, while cash flow was $45.3 mm or $0.23/sh (FCC: $40.7 mm or $0.21/sh).
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
LTS CJ PGF FPM SVY CERP
04 Nov 15
3Q15 ESTIMATES SLIGHTLY AHEAD OF EXPECTATIONS
Impact: Neutral. Despite the Company's 3Q15 production that was in line with our forecast and cash flow that was slightly ahead of expectations, a $0.5 billion impairment to PP&E and a bank line review looming in November will likely moderate any optimism from an investor base that continues to be concerned with the leverage profile here.
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.
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23 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.
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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.
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20 Aug 15
Lightstream Resources Ltd. (LTS) Announces 2Q15 Results
Lightstream reported second quarter results that were in line with our thinking, including production of 31,966 boe/d (72% oil and liquids) and cash flow of $67.0 mm or $0.34 per share. Management has maintained both its full year E&D spending and production guidance of $100 - $120 mm and 30,000 - 32,500 boe/d (73% oil and liquids), respectively, though we note guidance is now carrying a slightly higher natural gas bias of 27% versus 26% previously.
07 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
LIGHTSTREAM RESOURCES LTD. (LTS) PROVIDES PRODUCTION UPDATE, ANNOUNCES COMPLETION OF US$200 MM SECOND LIEN NOTES
Impact: Slightly Negative given reported 2Q15 production that was below both our estimate and consensus while also being slightly more biased to gas than our previous thinking.
15 Jul 15
LIGHTSTREAM RESOURCES LTD. (LTS) ANNOUNCES $90 MILLION DEBT REDUCTION AND $250 MILLION INCREASE IN CREDIT AVAILABILITY THROUGH SECURED NOTE ISSUANCE
Impact: Slightly Positive as the debt reduction is a step in the right direction to provide near-term breathing room for the financially burdened light oil player.
02 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
Lightstream Resources Ltd. (LTS) Reports 1Q15 Results, Imminent Resolution on Debt Terms
Lightstream’s first quarter results presented few surprises with production of 35,179 boe/d and cash flow of $52.5 mm or $0.27 per diluted share coming in line with our estimates of 34,295 boe/d and $53.7 mm or $0.27 per diluted share. On the operations front, the Company’s 1Q15 drilling program, which was focused on the Cardium and Bakken, represented the lion’s share of the 2015 drilling plans as the focus now shifts to the completion of a small backlog of wells in inventory, the ongoing renegotiation of debt terms and the potential disposition of Lightstream’s ~13,800 boe/d Bakken business unit.
06 May 15