RESEARCH - Whiting Petroleum Corp. (WLL) - Upgrading to Outperform - Anish Patel +
¦ We are assuming coverage of Whiting Petroleum Corp. (WLL) and upgrading our rating to Outperform from Neutral.
We raise our target price to $54 (from $42), which is based on a 10% discount to proved (1P) NAV. We likewise raise
our estimates to -$0.38 from -$0.91 for 2009 and to $1.36 from $0.66 for 2010 based on the higher growth and lower
costs displayed in recent Q2 results.
¦ Big Leverage to Oil. With oil at 75% of the production and reserves mix, WLL offers significant leverage to higher oil
prices that are running ~$77/Bbl on the 2010 strip versus the ~$69/Bbl Street consensus. WLL currently screens as
the most discounted oil levered E&Ps that is receiving little credit for its 1) premier position in the Northern Rockies
Bakken area (89k net acres) and 2) an internally funded double-digit volume growth profile.
¦ Solid Growth, Room for 2010 Acceleration. WLL is on track for 2009 production growth of 10-12% yr/yr and we see
acceleration potential in 2010 from rising internal cash flows. Specifically, we forecast at our $60/Bbl outlook and
current strip prices, WLL can boost 2010 capex a respective 30% and 75% yr/yr assuming a 100% reinvestment rate.
¦ Liquidity Improved. WLL has strengthened its financial liquidity through raising a combined ~$700MM from equity,
convertible preferred offerings and asset sales year-to-date. Borrowings on its $1.1B revolver likewise fell to $220MM
at June 30, while total debt stands at a very manageable 1.9x cash flow and 27% debt-to-cap.
¦ Discounted Valuation. WLL trades at a steep 21% discount to our proved NAV of $60, versus a 22% group premium.
Our “proved + projects” NAV of $72 includes value for two years of future drilling on its Sanish field in the
Bakken/Three Forks area of North Dakota (71k net acres).
Note published 27th August 2009
RESEARCH - Venoco, Inc. (VQ) - Unlocking California Oil, but Leverage High - Anish Patel +
¦ We are assuming coverage of Venoco, Inc. and maintaining our Neutral rating on the shares. We are raising our target
price to $10 (from $8), which is now based on a 10% discount to our proved (1P) NAV. We are revising our 2009/2010
EPS forecasts to $0.46/$0.59 and $0.48/$0.26.
¦ Sticking to ’09 Targets. VQ reiterated its 6.6% organic growth target for 2009 with a $150MM budget that should be
funded with internal cash flow. Production guidance implies an organic 6% decline in H2 volumes vs. H1 given a front-
end loaded capex program.
¦ High Leverage Limits Upside. Higher oil prices clearly improve VQ’s financial outlook and provide some room for
capex acceleration in 2010 (+13%) without the need for outside funding. However, we continue see VQ’s extended
leverage relative to the peers limiting material growth upside. Debt stands at 4.8x 2009E cash flow, while the $119MM
revolver was 44% ($52MM) drawn as of August 5.
¦ Renewed Focus on California Oil. Through its legacy southern CA assets, which represent 42% of production and
56% of 1P reserves, VQ has already developed a strong understanding of the Monterey shale. VQ is now exploring for
onshore potential, accumulating ~100k net acres to date with plans to add another ~100k net acres by mid-2010.
Results on two existing tests should be released once leasing is complete, but securing future capital will be key in
following up on any success.
¦ Valuation Discount Reflects High Leverage and Liquidity. VQ is trading at a 20% discount to our proved (1P) NAV of
$11 versus a 22% group premium and 27% premium for the oily peers. The shares likewise offer relative value and
exposure to emerging CA opportunities, but we see high leverage limiting significant growth upside going forward.
Note published 27th August 2009
RESEARCH - Quicksilver Resources, Inc. (KWK) - Priced for Higher Growth - Anish Patel +
¦ We are assuming coverage of Quicksilver Resources, Inc (KWK) and maintaining our Neutral rating on the shares. We
raise our target price to $12 (from $7), which is now based on parity to our “proved + projects” NAV that includes
unproven value for the Alliance and Lake Arlington properties in the core Barnett Shale. We likewise raise our 2010
EPS estimate to $0.79 from $0.63 due to lower operating costs and higher growth assumptions due to KWK’s building
backlog of uncompleted wells in the Barnett Shale of North Texas.
¦ Limiting Growth and Leverage. KWK is sticking to its plan of maintaining flat volumes and limiting further financial
leverage amid currently depressed natural gas prices. In its recent Q2 update, volumes rose an organic 1% qtr/qtr and
KWK reiterated its full-year production guidance of 325 MMcfe/d, which is flat versus Q4’08 and represents ~14% yr/yr
organic growth after adjusting for the Aug’08 Alliance acquisition and the June’09 Eni Barnett sale.
¦ 2009 Spending Gap Widens on Higher Budget. In the recent Q2 update, KWK lifted its budget 10% to $550MM for
additional spending on its Alliance properties. As a result, our estimated ’09 spending gap widens to $131MM for ’09
(at $55.70/Bbl and $4.37/MMBtu) suggesting debt could rise by ~$30MM before year-end. With KWK’s debt at 6.0x
2009E hedged cash flow, we simply see its extended leverage and expected 2010 cash flows (~$430MM at $6.50
NYMEX) limiting a material return of high rate production growth per share in 2010.
Valuation Looks Full. KWK s shares are currently trading at a 29% premium to our proved NAV of $9.00, which fairly full relative to the 22% premium for the gassy E&Ps and the 12% premium for the mid-cap peers
Note published 27th August 2009
NEWS - ExxonMobil (XOM) - BPMigas warns ExxonMobil - failure of production from Cepu Block
BPMigas has warned ExxonMobil that it may proceed with arbitration court if the production from Cepu block is not
reached to 15 kbpd levels by end of August 2009. ExxonMobil has promised to produce 15 - 20 kbpd levels by August
2009, but several problems including land clearing caused production delays.
Sulistya Hastuti, BPMIGAS spokesman stated that "There is an agreement from Exxon Mobil to produce oil from Cepu
in August. If it fails, we may bring Exxon Mobil to arbitration court,". He also stated "BPMIGAS may also change the
operator in Cepu block to Pertamina”
This block is located in Central Java, which is being jointly developed by Exxon Mobil and Pertamina. The initial
production from this block started in December 2008 with output volumes of around 800 bpd, however, during March
2009, the production was halted due to pipeline problems.
Source: Upstreamonline.com
NEWS - ExxonMobil (XOM) - Plans to sell 10% stake in Gassled joint venture in Norway
ExxonMobil is planning to sell its 10% stake in Gassled joint venture, which owns gas transportation system in
Norway. The Gassled consortium consists of StatoilHydro, Total, Shell, ENI, DONG A/S, and ConocoPhillips.
ExxonMobil Public Affairs Director Kristin Kragseth stated that "We will only sell if we receive an acceptable offer." And
she added that “the sale is the result of Exxon's long-standing and continuous review of its portfolio and denied that
the divestment demonstrates that the company is losing interest in Norway”.
She stated "We are committed to our investment in the North Sea and will continue to be an active investor in both
liquids and gas [assets]," adding "We don't see being an owner in Gassled as critical for our continued presence there.
We will still be able to use that service."
Source: Rigzone.com
NEWS - Saudi Aramco’s Shaybah field’s capacity increased from 500 kbpd to 750 kbpd
With the successful completion of a three-year construction programme at Saudi Aramco’s Shaybah oil field in the Rub
Al-Khali, the capacity has been increased from 500 kbpd to 750 kbpd. This new construction has added gas-oil
separation plant and expanded gas compression injection facilities.
In addition to this, as part of Saudi Aramco’s 20-year masterplan, it has also launched a scheme to build facilities that are capable of processing up to 7.2 billion cubic feet of gas per day at Shahbay field.
Source: MEED.com
The above items were extracted from
Credit Suisse Global Oil Daily of 28 August 20009 |
