Research, Charts & Company Announcements
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PENN WEST PETROLEUM LTD
PENN WEST PETROLEUM LTD
Reports 2Q16 Results, Revises Guidance, Announces Further Non-core Asset Sales
05 Aug 16
Penn West reported second quarter results that came in slightly ahead of our thinking, although in isolation we view the results as somewhat of a non-event in light of material disposition activity to date. More importantly we believe focus will be placed on the uplift to corporate guidance and operating cost reductions, which have resulted in positive moves to our forecast. As part of its “Phase II” asset sale initiatives, Management has shed a further 6,000 boe/d of production for proceeds of $75 mm that will be used to further shore up the balance sheet. With the Company continuing to make strides in its restructuring process, we have revised our ranking to Market Perform on an elevated target price of $1.75 per share.
ANNOUNCES 2Q16 RESULTS
04 Aug 16
Impact: Slightly positive. We view second quarter results in isolation as somewhat of a non-event in light of material disposition activity to date, and believe more focus will be placed on the uplift to corporate guidance and operating cost reductions, which should help to buoy our estimates going forward.
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.
Penn West Announces $1.1 Billion in Asset Sales, Including the Sale of its Saskatchewan Assets, Removes Debt Overhang
14 Jun 16
It comes as no surprise that the sale of Penn West’s Saskatchewan assets was viewed positively by the market, with the stock surging ~40% on the day, as the transaction materially reduces the Company’s outstanding debt position while ensuring it stays onside with its debt covenants for the foreseeable future. That said, it comes at the expense of parting with one of its prized assets, while further non-core dispositions will be required in order to improve the long-term outlook for the Company and allow it to be competitive within its peer group. With further action needed, we prefer to take a wait and see approach and thus see no reason to own the stock in the here and now. We maintain our Underperform ranking on a revised target price of $1.00 per share.
ANNOUNCES $1.1 BILLION IN ASSET SALES, INCLUDING THE SALE OF ITS SASKATCHEWAN ASSETS
12 Jun 16
Impact - positive as the transaction materially reduces the Company's outstanding debt position while ensuring it stays onside with its debt covenants that were set to be breached by the end of 2Q16, although comes at the expense of parting with its best asset with further non-core dispositions required in order improve the long-term outlook for the Company and allow it to be competitive within its peer group.
Weekly U.S. Natural Gas Storage Update
17 May 16
Our forecast for this week’s report is for an injection of 77 bcf. Last week was probably one of the most weather neutral weeks so far this year, as demand slipped modestly in all the major categories, while supplies held firm for the most part. With such slack conditions, we think the market can hold more in the 70s bcf range for injections, but still well below year ago injection rates, and below 5-year average injection rates for this time of year. This will prove critical in keeping storage levels more on track to reach average levels by the end of October.
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
01 Nov 16
Since our last outlook note, Quadrise has begun to supply MSAR for extended LONO sea trials, paving the way for commercial adoption from calendar H217 onwards. In August it signed a memorandum of understanding with clients in the Kingdom of Saudi Arabia (KSA), which is a key enabler for progressing the production-to-combustion pilot there. In October it completed a placing and open offer raising a total of £5.25m (gross). This should enable it to transition comfortably to the commercial phase on successful completion of the LONO and KSA trials.
Dividends reinstated; is it time to turn (more) optimistic?
08 Dec 16
Glencore continues to surprise the markets, earlier with its fast pace of asset disposals and now with the reinstatement of dividends. The following were the key details shared with investors in a meeting held on 1 December 2016: 1/ completed $6.3bn of asset disposals; 2/ reduced net debt (including readily marketable inventories) by $12.5bn over the last 18 months; 3/ reiterated trading’s 2016 EBIT guidance towards the upper end of the $2.5-2.7bn range; 4/ expects healthy annualised 2016 free cash flows – even at Q1 16 commodity price lows; at 2017 forward prices, FCFs are guided to be $6.5bn; 5/ dividends would be reinstated from 2017 – with $1bn to be paid in two equal tranches in H1 and H2; thereafter (i.e. 2018 onwards), $1bn would be a fixed annual dividend payment (banking on the stability of trading’s cash flows) plus a minimum 25% of FCFs from industrial activities. Production guided to grow Source – Investor Presentation December 2016 While copper would be negatively impacted by the end-of-life impact at Alumbera and the Ernest Henry divestment, the output for all other commodities is guided to be higher (in varying degrees).
Raising Target Price to 2,500p per share
01 Nov 16
Royal Dutch reported clean EPS of US$0.35, nearly 50% ahead of consensus. More importantly, cash flow jumped QoQ to US$8.5bn which should go a long way to confirming Shell’s capacity to maintain the current dividend, despite the increase in gearing to 29.2%. Upstream returned to profitability on an underlying basis for the first time since 1Q15. We believe these results confirm our view that Shell’s dividend can and will be maintained at US$0.47 per quarter and we increase our Target Price to 2,500p per share, given further sterling weakness.