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Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: Rocket Red who wrote (157494)	5/8/2009 2:53:15 PM
From: Veteran98	Read Replies (1) \| Respond to of 313569

I T H A C A E N E R G Y I N C . IAE-TSX V: C$0.57, IAE-AIM: 34.5P — BUY TARGET PRICE: C$1.45; PROJECTED RETURN: 164% Research Capital - $1.45 target OIL & GAS TARGET PRICE: C$1.45; PROJECTED RETURN: 164% JACKY EXPECTED TO BE ON STREAM BY MONTH END EVENT – YEAR-END RESULTS AND RESERVE UPDATE Ithaca announced year-end financial results and updated oi l and gas reserves. The company exited 2009 with cash of US$39.2 mi l l ion ($47.9 mi l l ion). Year-over-year, proven plus probable reserves increased 9.5% to 28.7 mi l l ion boe. HIGHLIGHTS Slight Y/Y increase in reserves: After accounting for the sale of assets to Dyas and the sale of the Barbara field, estimated reserves increased by 9.5% to 28.8 mi l l ion barrels. The NVP10 after-tax value was US$357.7 million ($420.0 mi l l ion). Year-end cash of US$39.1 mi ll ion: As at December 31, 2008, Ithaca had US$39.1 million ($47.9 mi l l ion) of cash. Netting out the US$60 mi l l ion ($73.4 mi l l ion) convertible loan from Dyas, we calculate net debt of US$20.8 mi l l ion ($25.5 mi l l ion). Note that Dyas has an opt ion to convert the loan for an addit ion 15.15% interest in Ithaca’s portfolio of assets. Net production to increase to 7,000 bbl /d: First product ion from the Jacky field is anticipated to commence on or about the end of March 2009. Combined with current product ion from the Beatrice field, we expect that Ithaca’s product ion wil l increase to 7,000 bbl /d. VALUATION – SMALL INCREASE TO RISKED NAV Our risked net asset value is based upon the estimated proven and probable reserves adjusted for net working capital or debt, plus risked potential for near-term exploration drilling. Based upon the updated reserve report , our risked net asset value increased slightly from $1.43/fd share to $1.48/ fd share. RECOMMENDATION – MAINTAINING BUY AND $1.45 TARGET PRICE Given the weak financial markets, Ithaca plans to fund i ts 2009 and 2010 operations with its existing cash resources, cash f low, and selective farm-outs. Ithaca’s stock price has appreciated recently with the price of crude, and after the Jacky field is placed on stream in early April , net oil production should increase from approximately 2,000 bbl /d to 7,000 bbl /d. We maintain our BUY recommendation and $1.45 target price, equivalent to a 1x multiple of our fully-diluted net asset value estimate. VALUATION CATALYSTS – FIRST PRODUCTION FROM JACKY, THE STELLA APPRAISAL WELL, AND OIL PRICES The near-term catalyst is the initiation of first product ion from the Jacky field. In September 2009, Ithaca expects to spud the Stella appraisal well (49.8% W.I .). A recovery in the price of oil could also move the stock higher.