Research, Charts & Company Announcements
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ZARGON OIL & GAS LTD
ZARGON OIL & GAS LTD
30 Sep 16
Due to a reallocation of resources, we are discontinuing coverage of Zargon Oil & Gas with a Market Perform ranking and $0.75 per share 12-month target price (last effective date - August 16, 2016). Zargon remains in a strategic alternatives process, which has thus far resulted in the disposition of the Company’s Southeast Saskatchewan assets for proceeds of $86.8 mm and Killam, AB assets for proceeds of $4.0 mm. Combined production from these disposed assets was ~1,340 boe/d (91% oil and NGLs). Pro-forma the dispositions, Zargon retains a low-decline production base of ~2,600 boe/d (83% oil and NGLs) from its remaining properties in Alberta and North Dakota.
Second Quarter Results
15 Aug 16
Zargon‘s second quarter results were slightly behind on production while ahead on cash flow, although largely irrelevant in the context of the sale of the Company’s southeast Saskatchewan assets subsequent to quarter-end along with the ongoing strategic alternatives process. Recall at the end of July, Zargon announced the sale of its Southeast Saskatchewan assets for gross proceeds of $89.5 mm in what was the first transaction executed since initiating its strategic alternatives process. Management noted no changes to proforma guidance announced with the aforementioned sale, and expects to be in a position to provide further clarity on guidance upon closing of the sale in early September. We maintain our $0.75 per share target price and Market Perform ranking coming off of the second quarter release.
Announces Sale of Southeast Saskatchewan Assets
27 Jul 16
Zargon announced the sale of its Southeast Saskatchewan assets in what is the first transaction executed since initiating its strategic alternatives process. We view the transaction positively as the disposition was done at highly accretive metrics, and significantly reduces the Company’s outstanding debt position providing increased financial flexibility as the Company continues to work through its strategic alternatives process. Management provided an updated capital expenditure program for 2H16e and 2017e that will continue to see limited investment absent of a recovery in the commodity price complex. Updating our estimates for the asset sale, we have increased our target price to $0.75 per share while maintaining our Market Perform ranking.
2Q16e Quarterly Preview
26 Jul 16
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.
ANNOUNCES SALE OF SOUTHEAST SASKATCHEWAN ASSETS
25 Jul 16
Impact - positive as the disposition was done at highly accretive metrics, and significantly reduces the Company's outstanding debt position providing increased financial flexibility as the Company continues to work through its strategic alternatives process
Strong trading leads to upgrades
22 Mar 17
On the back of today’s positive trading update and slightly upgraded profit forecasts for FY2017, FY2018 and FY2019 we have reviewed our DCF analysis. This has led to an increased DCF valuation per share of 1500p (from 1200p) which we have made our new target price (from 1200p). Both TFP and JC Paper have contributed to the upgrades shown in the table below as have favourable currency movements. With the potential for further upgrades due to capitalising 3DP costs to come we maintain our Add recommendation.
GMP FirstEnergy ― UK Energy morning research package
17 Mar 17
Pacific Exploration & Production1,6 (PEN CN); BUY, C$72.00: 4Q16 results and improving outlook | Serinus Energy (SEN CN)1, 3; Speculative Buy, C$0.65: FY16 results | IGas Energy (IGAS LN) (not covered): Final terms of a previously announced proposed capital restructuring | Tullow Oil (TLW LN): HOLD, £3.10: Right Issue at a discount & CNOOC exercises pre-emption rights in Uganda
Bang to rights
21 Mar 17
Tullow unexpectedly announced a US$750m rights issue on Friday at a 45.2% discount to the previous close. While this step confirms our investment thesis, the scale of the discount and the timing look like a slap in the face for investors and/or indicative of a weaker financial position than we are modelling. We publish revised estimates to reflect the impact of the issue and cut our Target Price to 215p per share (from 245p). We maintain our Hold recommendation.
Panmure Morning Note 22-03-2017
22 Mar 17
Acacia Mining and Endeavour Mining confirmed merger talks have now ended with Endeavour claiming an inability to “create adequate value for Endeavour shareholders”, most likely, we believe, given the disappointing ruling from the Tanzanian government on copper-gold concentrate sales. We were positive on the merger and believed a credible London listed Pan-African producer capable of challenging Randgold, would have been established. We make no change to our Hold recommendation today, and expect the shares to be marked lower in early trade.
South Disouq spuds
20 Mar 17
SDX Energy announced this morning that it has spudded the South Disouq (SD-1X) well in Egypt, targeting gas and oil across a number of intervals. This is a high impact event for SDX Energy, as current company 2P reserves of 4.7mmboe (post acquisition) would be dwarfed by success at South Disouq (we model a 65mmboe field of which SDX holds 55% WI), which could be developed quickly due to existing pipeline infrastructure passing through the block. Our valuation for South Disouq is 6.8p/share, although on success we would expect notable de-risking. Our core NAV is 42p with a full NAV (including South Disouq) of 57p/share. The well is due to take 30-45 days, so we would expect a result in mid late April.