The only thing you can say about PBN’s results is: outstanding.
This was a big time turn-around from 2Q spring breakup.
They are already at 47,500 per day and expect to exit 2011 at over 49,000 per day (49k was their previous year end exit number, so this is a production beat and raise). BMO’s analyst was at 39k. How wrong he is.
Assuming a go-forward production rate of approximately 49,000 boepd (87% oil weighted), the estimated discretionary cash flow would be approximately $905 million in 2012, assuming US$90 WTI, foreign exchange of 0.975, AECO CDN$3.50 and a 5% differential. A $10 change in oil = $100MM change in cash flow.
Analysts are expecting this year’s $900MM capital program to be repeated next year… Management gave hints it might be much less (perhaps ~$500MM). This which would mean FCF could be $400MM or more. So much for their balance sheet problems.
Their covenants are easily being met.
Looks like the cross-over point when cash flow will meet spending needs + dividends will be sometime in 2012 (based on $90 oil and reasonable production growth).
Three wells have been drilled in the new plays and they aren’t saying much. That is a good sign.
@Kevin @Sacha – you still have time to reverse course. I would suggest it’s much better to focus on this deep value opportunity than Yellow Media or BAC. Poor souls.
I’m not sure whether we were reading the same quarterly report or not. Average bopde for the first 9 months of the fiscal year is down 8% from 2010 to 2011 (page 10); the emphasis on “estimated” or “current” production is relatively meaningless unless if such production can be sustained – and if so, at what capital cost? Reading the report, Q4’s capex is going to be yet again over operating cash flow.
Average WTIC in CDN$ was up 16% on average from 2010 to 2011, which is a boost to the company’s results – there is no doubt whatsoever that high oil prices will assist Petrobakken, along with any other crude production company. Despite the production drop, this price gain in WTIC increased the revenue intake. Indeed, crude price rises will be their only real way for salvation – if they experience drops in crude pricing, it will be financially very damaging below a certain point.
Now it could be the case that Israel does an air strike on Iran and crude oil spikes – getting lucky with Deus Ex Machina is one way of realizing investment gains.
Cash outflow (primarily through capital expenditures) was about $106M over operational cash flows – add another $45M in dividends out the door in the quarter means the company digs another $151M deeper into its bank facility – they will be forced to slow down capital expenditures as they are running up against their bank credit line and also have to face the issue with the put they sold on their US$750M debenture issue (February 2013). When the capital expenditure spigot stops – how quickly will that production fade? We’ll find out pretty soon.
No positions in PBN, nor will I be creating any.