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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: Greg Spendjian who wrote (5028)4/30/1998 8:33:00 PM
From: Kerm Yerman  Read Replies (2) of 24921
 
Greg / Canadian 88 Energy

Canadian 88 Energy*
(EEE-T: $7.40) HOLD
1997 Results Below Expectations

Canadian 88 Energy has reported 1997 CFPS of $0.35 vs. $0.35, below our forecast of $0.40. This is despite the fact that we had dramatically reduced our 1997 forecast in late 1997 when it was evident that the company was significantly behind its own earlier projections.

This was primarily due to development delays at its two most significant areas: Olds/Crossfield, and Waterton. Canadian 88's natural gas production only grew 16% to average 66 mmcf/d in 1997, below our forecast of 70 mmcf/d.

However, the company has reported impressive finding & development costs for 1997, at $3.36/boe. It also realized an excellent average natural gas price in 1997, at $2.08/mcf.

With the dilutive impact of its recent equity issue, we have reduced our 1998 CFPS projection from $0.65 to $0.60, and our 1999 preliminary projection from $1.05 to $1.00.

While Canadian 88 stock is expensive at this level, we continue to recommend a HOLD based on currently strengthening North American natural gas markets.

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For what it's worth, I also feel the share price is at a lofty level.
I wouldn't pay more than 6X 1999 cash flow for shares in the company.
6X cash flow allows for a premium multiple. Average 1999 cash flow for companies with market cap of $500 mil or higher is 5.0X.
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