RJ EnergyGroup, Tuesday, May 06, 2008 8:55 AM
Daily Update
Energy stocks advanced yesterday, as both crude oil and natural gas increased. Crude eclipsed the $120 mark on concerns of supply disruption and signs of increased U.S. demand. A report yesterday showed that U.S. service industries increased in April, signaling higher energy use. Royal Dutch Shell (RDS.A/$80.43) confirmed today that the attack in Nigeria over the weekend has forced the company to reduce exports by 170,000 Bbls/day. Pre-market, both natural gas and crude are trading lower.
BPZ Resources (BZP/$21.90/Strong Buy) Spuds the High Potential 20XD Well at Corvina. The well has the potential to be the company's largest well to date, with a 30 MMbbl pre-drill estimate, as it will be drilled at a greater angle (about 77% horizontally) to intersect the largest number of potentially producing horizons. The well should take about 90 days to reach total depth, and following completion we should hear results perhaps in July.
Inergy (NRGY/$29.30/Strong Buy) Fully Contracts Thomas Corners' Natural Gas Storage. Inergy has sold out the available storage capacity (~5.7 Bcf with five-year agreements) at its Thomas Corners project, paving the way for expansion plans, such as interconnects with other gas pipelines. Combined with Stagecoach, Inergy now controls over 40 Bcf of working gas storage, making it one of the largest natural gas storage operators in the northeastern U.S. Inergy's diversification into gas storage is a strong positive, as it not only provides increased visibility into cash flows, but offers more stability/diversification of Inergy's model.
Boardwalk Pipeline Partners (BWP/$24.40/Market Perform) Gets FERC Approval on $3 Billion in Projects. Boardwalk received approval to construct its Gulf Crossing Pipeline and Fayetteville/Greenville Laterals. The first 60 miles of the Fayetteville lateral will commence in 3Q08 with the remainder, and other projects, following in 1Q09. Now that FERC approval has been granted, Boardwalk must execute on its $4.5 billion growth portfolio. Given the scale/scope of these initiatives and their financial impact, we believe Boardwalk can generate a three-year CAGR in distributions over 8%; however, the timing of growth materializing relies on integration.
A Third Australian State Moves Towards Solar Feed-in Tariff. The government of Victoria, Australia's second most populous state (population: 5.2 million), has announced plans to enact a feed-in tariff for solar power, following in the footsteps of South Australia (1.6 million) and Queensland (4.2 million). The proposed tariff is A$0.60/kWh ($0.56/kWh), one-third higher than in the other two states and one of the most generous in the world. This is the latest data point from Australia that demonstrates the country's increasingly favorable policy landscape for renewable energy, notably solar.
Earnings Snapshots
Comstock Resources (CRK/$47.17/Outperform) Beats in 1Q08 as Production Jumps 25%, Raises Budget. Comstock reported 1Q08 net income per diluted share of $0.91, handily beating our estimate (same as consensus) of $0.67. The upside vs. our estimate came from higher-than-expected production (up 25% y/y), higher price realizations, and lower operating costs. Comstock posted a solid 97% drilling success rate in 1Q08, and is seeing a notable increase in initial production rates from the E. Texas/N. Louisiana region. The company is boosting its Cotton Valley drilling program, with more horizontals and Haynesville drilling on tap.
Parallel Petroleum (PLLL/$22.03/Outperform) Beats in 1Q08, Barnett Drives Clear Production Breakout. Parallel posted 1Q08 operating earnings per diluted share of $0.14, beating our estimate and consensus of $0.13. The upside to our estimate was driven by strong operations across the board, led by record production (3% above forecast) and pricing. The reported net loss of $0.07 included a non-cash loss on derivatives. Driven by robust growth from its two resource plays (Barnett and Wolfcamp), Parallel posted impressive y/y growth of 30%, providing the first tangible production data point along the accelerated growth curve targeted for 2008.
W&T Offshore (WTI/$42.66/Outperform) Sweeps 1Q08; 100% Success on Exploration YTD. Earnings per share were $1.10 (clean), widely beating our estimate of $0.85 (higher volumes/prices and lower op costs) and consensus of $0.90. Production was ~3% higher than our model and over guidance of 29.2-30.7 Bcfe; also, the lower end of 2008 guidance has been raised (110-140 Bcfe has been changed to 115-140 Bcfe). W&T has posted a great track record with eight exploratory wells drilled YTD (seven shelf, one deep shelf) with 100% success. Bottom line: Significant upside during 1Q08, both financially and operationally, should move the stock up today.
Bois d'Arc Energy (BDE/$23.77/Market Perform): Big Earnings Upside in 1Q08; Three Drilling Successes YTD. Bois d'Arc reported net income per diluted share of $0.56 in 1Q08, far exceeding our estimate of $0.35 and consensus of $0.46 and marking the fifth consecutive quarterly beat. The upside vs. our estimate came from higher realized pricing, along with lower costs across the board: operating costs, exploration, and DD&A expense. Production totaled 10.7 Bcfe, up 6% y/y, while both unit operating costs and DD&A decreased on a sequential basis. Operations also appear to be on track to start off the year.
Forest Oil (FST/$60.72/Market Perform) Beats 1Q08 Estimates; Growth Right Around the Corner. Forest posted record 1Q08 operating earnings per diluted share of $1.06, above our estimate of $0.91 and consensus of $0.89. The upside was due to higher realized prices and a tax benefit. Reported net loss of $0.05 per share was impacted by a hedging loss. As preannounced, 1Q08 production totaled 478 MMcfe/d, up 56% y/y, but down 3% sequentially. Forest is guiding to 5-6.5% sequential production growth in each of the next two quarters, amply illustrating the company's organic growth potential.
Basic Energy (BAS/$24.81/Market Perform) Edges Wall Street Estimates. Basic reported EPS of $0.47, above our $0.45 estimate and consensus of $0.46. Higher revenues and margins in the Completion and Remedial services business and lower D&A expenses drove the beat. That said, the Well Servicing and Contract Drilling segments posted lower margins versus what we were looking for in 1Q08. Activity has been steadily improving (according to monthly operating data) and this should continue during the back half of the year. Basic reiterated guidance given on the last conference call and our estimates should go slightly higher.
Anadarko (APC/$68.14/Market Perform): Solid 1Q; No Change to Outlook, Even with Downtime at Indy Hub. Anadarko reported earnings per share of $1.54, beating our $1.17 and consensus of $1.26. The big upside was due to much higher realized prices (24% higher on gas and 8% higher on oil) relative to our model. Production was in-line; full-year guidance of 207-212 MMboe was upheld despite ongoing hub downtime. Our model is at 213 MMboe, as we still believe guidance is conservative. Notable highlights: significant deepwater Ghana discovery and very nice growth from the Greater Natural Buttes and Powder River Basin areas.
PetroQuest Energy (PQ/$21.49/Market Perform) Beats 1Q08, Posts Strong Results in Woodford. PetroQuest reported 1Q08 net income available to common shareholders of $0.28 per diluted share, beating our estimate of $0.23 and consensus of $0.26. The upside was due to higher realized prices. Production for 1Q08 was 86.7 MMcfe/d, the low end of its guidance of 86-92 MMcfe/d. For 2Q08, the company is guiding for production of 91-97 MMcfe/d, in-line with our forecast. Operationally, PetroQuest remains on-track, placing online three new horizontal Woodford wells which had impressive IP rates of 4.6, 6.0, and 6.3 MMcfe/d.
Cimarex Energy (XEC/$63.37/Underperform) Beats 1Q08 Estimates; Permian Oil Drives Production Growth. Cimarex reported 1Q08 net income of $1.76 per diluted share, handily beating our estimate of $1.35 and consensus of $1.61. The upside to our estimate was due to higher production and price realizations. As preannounced, Cimarex's 1Q08 production was 476.2 MMcfe/d, equating to 8% year-over-year growth, and 1% sequential growth. Production was led by a 16% y/y increase in oil volumes, which reflected the company's successful horizontal drilling program in southeast New Mexico and West Texas.
Bill Barrett Corp. (BBG/$50.77/Underperform) Posts Strong 1Q08 Beat; Exploration Catalysts on Tap. The company posted operating earnings per diluted share of $0.70 in 1Q08, well above our estimate of $0.38 and consensus of $0.41. The upside stemmed primarily from higher production (5% above forecast), stronger pricing, and lower dry hole costs. The company shifted its production guidance and budget higher, while also narrowing its unit cost ranges. Operationally, we should see results next quarter from its first horizontal well in the Yellow Jacket (Paradox) project, and continued results from the deep program in the Uinta Basin.
PRICES
Oil $119.73, down $0.24 (-0.2%) pre-market
Gas $11.15, down $0.03 (-0.3%) pre-market
Rockies gas price (Opal): $8.51
Gasoline $3.05/gal, up $0.09
Ethanol $2.77/gal, down $0.04 |
