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Cardinal Energy (CJ-TSX); BUY, C$3.50 | Cenovus Energy (CVE-TSX); BUY, C$15.50
Companies: Cardinal Energy Ltd. (CJ:TSE)Cenovus Energy Inc. (CVE:TSE)
Five-year outlook emphasizes a nimble and prudent capital allocation strategy, but is still centred on taking net debt to <$5B, which we see occurring by ~YE2020e. CVE is quickly delivering, diffs should stay relatively narrow, and management is executing.
Companies: Cenovus Energy Inc.
Our 1Q18e production estimate is down 5%, but our FY18e estimate is largely unchanged given unchanged production guidance, while our ‘18e CFPS estimate is down 2%. Our official estimates do not yet reflect QTD commodity prices. However, based on QTD prices, we suspect 1Q18e CFPS may be ~zero. $14.50 TP and BUY rating unchanged.
The process to divest of CVE’s four legacy properties is nearly finished, as CVE announced a $940 mm transaction for Weyburn. The $940 mm figure is roughly in line with the $1.0 billion figure we were using in our modeling assumptions, which we suspect is similar to Street consensus expectations.
3Q16e WTI prices look set to average ~US$44.50/bbl vs. our $50.00/bbl prior estimate. We have also reduced our 4Q16e WTI forecasts by US$5.00 to US$50.00/ bbl, but left our 2016e+ oil & gas price deck largely unchanged. For the second time in three months we are increasing our forecasts for Canadian refined product premiums relative to New York Harbor.
Companies: CVE IMO SU CNQ ECA ATH MEG PXX
CVE’s cost structure continued to decline in 2Q16, even prior to ramp-up of two large projects in 2H16e. Our go-forward CFPS estimates are modestly improved as is our RENAV. Target price increased $0.50 to $18.50/share. The stock looks inexpensive relative to our longer term views, but expensive at US$60/bbl WTI. CVE’s core assets are currently generating low margins (bitumen, mid-west U.S. refining).
Market Impact: Positive, as CFPS beat expectations, and capex and opex guidance have been reduced.
The Fort McMurray wildfire took more than 1.2 mmbbl/d of oilsands production offline at one point, disrupting operations of many companies within our coverage universe. We expect production estimates for many oilsands producers (HSE, IMO, SU, ATH) to be more varied than usual with more variables to account for than usual (downtime, ramp up, sales volumes). SCO prices were boosted by the wildfire, with CNQ best positioned to have taken advantage, given the upgrader at Horizon was only mildly aff
Macros: Commodities - Energy
We have analyzed recent Company estimates of sustaining capital. Relative to our approximations of sustaining capital, post Horizon expansion, at current prices CNQ offers a far better free cash flow yield than the Canadian Integrateds, even in a high case refining margin scenario (see charts on page 2). We are upgrading our ranking on CNQ to Top Pick from Outperform, increasing our target price by $3.00 to $47.00/share, while we have reduced our target prices for both HSE and CVE by $1.00/share
Companies: CNQ CVE IMO MEG SU
Commodity Price Update – Impact on Integrateds, Large Cap E&P, Oilsands
1Q16 cash flow was, as expected, negligible, despite hedging gains, given lowcommodity prices . 2016e capex guidance is now $1.2 billion (previously $1.2-$1.3 billion).Expansion projects remain on track, while Foster Creek’s base operations appear to have turned a corner, again.While cost reduction efforts continue, lease commitments will likely mean that CVE’s G&A costs per boe will remain above average.Year end disclosures suggest that abandonment liabilities may be turning CVE’s gas assets in
Market Impact: Neutral. Investors were well aware that low prices were going to result in negligible cash flow for CVE in 1Q16. Operating and financial results were, broadly speaking, in line with expectations.
We are updating our estimates to reflect FirstEnergy’s updated price deck for oil, natural gas, and refining crack spreads.
Estimates and NAV updated post 4Q15 results and annual reserves disclosures. Reduced capex, reduced dividend, and new hedges have improved our YE2016e net debt forecast by $0.9 billion, implying a net-debt-neutral 2016e outlook at our price deck (~$0.9 billion increase at the strip).
Market Impact: Probably negative, given that once again Management did not anticipate production issues at Foster Creek. The dividend cut is significant but not totally unexpected, and in this market it may be a good thing for the stock.
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Companies: Savannah Energy Plc
Forecast and valuation update
Companies: IOG PLC
AfriTin Mining (“ATM”) has announced another record-breaking quarter from Uis Phase 1. Tin production increased 13% QoQ to 152t for the three months to May (Q1 FY’23), supported by record recoveries, which along with cost initiatives drove a 16% improvement in All-In Sustaining Costs. The strong performance continues to support growth projects including incorporation of petalite lithium and tantalum by-products, upon which AfriTin recently announced positive drilling and metallurgical test work
Companies: AfriTin Mining Ltd.
Hannam & Partners
Chariot has signed a front-end engineering and design (FEED) agreement with Schlumberger and Subsea 7 (the Subsea Integration Alliance) for the Anchois gas development project. Chariot and the Subsea Integration Alliance will adopt a “one team” integrated and collaborative approach to fast-track first gas from Anchois to maximise the return on investment for all stakeholders. The scope of work covers all the development's offshore elements including well completions and subsea production systems
Companies: Chariot Limited
Oil posted its seventh weekly gain as tight fuel-supply balances sustain bullish fundamentals, though headwinds brought on by accelerating US inflation capped crude's advance.
West Texas Intermediate fell 0.7% after trading in a $4 range during a volatile session on Friday. Despite the fall, WTI ended the week 1.5% higher. The US Labor Department reported inflation quickened to a 40-year high, chilling broader markets and potentially signalling to the Federal Reserve to extend an aggressive
Companies: FO 88E CHAR DEC EME GTC TRIN WEN
Wentworth has announced a positive operational update ahead of its AGM to be held later today. Daily production year-to-date (YTD) has averaged 92.2MMscf/d, a c15% YoY increase (2021: 79.9MMscf/d) and ahead of Wentworth's 2022 guidance of 75-85MMscf/d. As noted previously, the strong performance of the Mnazi Bay asset YTD has allowed Wentworth to increase its total dividend distribution in respect of 2021 to 1.7p per share, a yield of c7.1%. Mnazi Bay continues to supply Tanzania with half of th
Companies: Wentworth Resources PLC
EQTEC has accepted the offer of a loan with an up to 75% LTV on an existing waste to energy project in development in Greece. We think this shows that EQTEC’s technology is now able to demonstrate a commercial maturity ahead of most others in the sector. With the additional potential for funding support under the Recovery and Resilience Facility, the potential for both this and other EQTEC projects in Greece is strong.
Companies: EQTEC PLC
EQTEC has reached a key milestone in its Southport energy from waste project with the appointment of Anaergia as EPC and O&M partner. This is a complex project using multiple waste treatment solutions and we see EQTEC’s inclusion as a demonstration that it’s technology can combine with these to create an optimal outcome.
AfriTin Mining Limited (AIM: ATM), has released initial results from its Lithium and Tantalum drilling program at the Company's flagship polymetallic asset, the Uis Mine. This comes on the back of the announcement of positive lithium test work where a high purity (up to 94%) petalite lithium concentrate was produced from bulk ore samples by independent test facilities. Today's announcement combined with the test work adds further confidence of the Company successfully extracting lithium and doin
• Section II of the Northern Peruvian Pipeline has been temporary re-opened.
• As a result, 0.72 mmbbl of PetroTal’s Bretana oil has been tendered at the Bayovar port by Petroperu for the July lifting. This oil previously entered the pipeline in late 2020 for which PetroTal was paid just ~US$45/bbl at the time.
• PetroTal will receive the difference between this price and the price at which Petroperu will sell the oil in July (~US$120/bbl), generating over US$60 mm of price adjustment true-up r
Companies: PetroTal Corp.
• 2022 YTD gross production was 92 mmcf/d, ahead of our expectations of 89 mmcf/d for 1H22.
• The FY22 production guidance remains unchanged at 75-85 mmcf/d. It looks very conservative in our view.
• The company currently holds US$26 mm in cash and no debt. This is in line with our expectations.
• TPDC continues to be current with regards to receivables.
• We re-iterate our target price of £0.45 per share.
Steady growth and dividend
Our Core NAV for the company based on its 2P reserves only i
Savannah, which operates the Barroso lithium mine project in Portugal, reports today the results of its locked cycle test to determine optimal flotation reagents to confirm lithium recoveries and spodumene concentrate grades. Savannah is aiming for a 5.5%Li2O concentrate grade with a near 80% recovery. The reported work confirms that these should be possible and that in larger scale, bulk testing these parameters may improve. The work also highlights that there are still optimisations to be h
Companies: Savannah Resources Plc
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