CG - Energy -- Oil Sands & Heavy Oil .
Q1 earnings season commences on April 30th with MEG Energy reporting pre-market. The theme of the quarter will be strong heavy oil and SCO pricing owing to narrowed differentials as well as the weaker C$. MEG Energy is our favorite long going into the quarter as we believe an update on March and a possible update on April production as well as any indication around realized prices received for railed production could positively surprise the market. The latter, if disclosed, would also be a net positive for the industry from a pricing uptick perspective as it would provide transparency to the upside potential that occurs when railing to the coasts and the uptick potential that we expect to happen to volumes (particularly MEG’s) shipped down the Flanagan South pipeline when it commences production around mid-2014.
Athabasca Oil Corp. (ATH : TSX | HOLD) is scheduled to report Q1 results on May 8th pre-market. A conference call will be held the same day at 9:30 AM ET. There are three highlights to possibly come out of the release: 1) With the Dover Put option exercised, we could get an indication on where the $1.23 billion (to be received sometime in the latter half of this quarter) will be allocated. Now of note, a revised capital budget is not expected until the June/July time frame; 2) More details on the Duvernay JV process. As stated in prior research, we believed financial uncertainty was the overhang on the JV process. To that end, the Put option removed the overhang, in our view; and 3) Duvernay well results.
Baytex Energy Corp. (BTE : TSX | BUY) is scheduled to report on May 1st, pre-market. A conference call will be held on the same day at 11 AM ET. We estimate that BTE will report Q1/14 production of 59.4 MBOE/d and CFPS of $1.37. Recall that December production was curtailed by ~ 5 MBbl/d; and according to the company, Q1 rates were back to normal. Thus, we are forecasting a 2% QoQ increase in volumes. Bloomberg consensus calls for Q1 production and CFPS of 59.8 MBOE/d and $1.34 respectively. We could possibly get additional well results from the area of Peace River where the company has been experiencing high IP rates. Recall that BTE announced with Q4/13 results that 2013 average 30-day peak production at multi lateral horizontal wells in Peace River were ~600Bbl/d which is near the upper end of the company’s type curve of 300 - 700Bbl/d. For this year, BTE plans to drill 36 multi-lateral horizontal wells.
Canadian Oil Sands Ltd. (COS : TSX | BUY) is scheduled to report on April 30th, after-market. Per usual, the company will not be hosting a conference call. We believe a potential update to realized pricing and FX rate guidance (COS is currently using an assumption of US$90 WTI, a $5 SCO discount to $C WTI, and an FX rate of $0.97) could highlight the cash flow and dividend upside potential that led us to upgrade the stock on April 21st and to reiterate our BUY rating post the April 24th announcement that Syncrude’s Coker 8-1 unit will undergo unplanned maintenance.
MEG Energy Corp. (MEG : TSX | BUY – Focus List Pick) is scheduled to report on April 30th, pre-market. A conference call will be held the same day at 9:30 AM ET. Production and realized prices could be key catalysts for the stock. Recall that per Geoscout, February averaged 60.2 MBbl/d, which is at the low end of the company’s full year 2014 production target of 60-65 MBbl/d. We are expecting March to have continued to ramp up, averaging about 63.5 MBbl/d during that month. Of note, there is a scheduled turnaround in May for Phases 1 through 2A (not 2B) that is expected to last about three weeks and impact total production by an estimated 37 MBbl/d during that time (this is factored into guidance).
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