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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (141570)	11/3/2010 6:58:00 PM
From: Ed Ajootian	2 Recommendations Respond to of 206338

END announced a 3Q10 adjusted loss of ($0.09), which was lower than our estimate of a loss of ($0.01). The lower earnings number was mainly attributable to a $10.2MM realized derivative loss and $2.3MM of deferred financing cost, which were triggered by early termination of the firm’s senior credit facility. The loss from commodity price derivatives was realized when underwater derivatives contracts that were collateralized to the firm’s assets under the bank agreement were sold to close out the senior credit facility. • Oil and gas sales of 4.7 MBOEPD came in lower than our 5.2 MBOEPD estimate. Production was closer to our estimate, but due to a missed product lifting at the Alba development, about 400 BOEPD of production was deferred for sales in 4Q10. Realized commodity price of $44.29/BOE was slightly lower than our $44.87/BOE estimate. The lower production and prices only accounted for about $0.01 of the underperformance in earnings compared with our estimate. • About $190MM of liquidity from the sale of Cygnus and the new senior credit facility is available to fund the development of the Bacchus oil field for a mid-2011 start up and the Rochelle gas field for mid-2012 start up. END expects to net 1,500-2,000 BOPD of production from Bacchus for an investment of ~20-$25MM. At this production rate, Bacchus could generate enough cash flow to pay off in as little as six months. At Rochelle, a one well development tied back to the Scott Platform is expected to cost about $250-$300MM and achieve peak production of 80 MMCFPD. END’s has a 56% working interest in Rochelle. Development of the recently discovered West Rochelle field will be tied into the Rochelle development at some later date and extend the peak production rate in the field. • We maintain our BUY rating for END and our target price of $2.25, which is supported by our NAV. A number of positive events that have occurred over the last few months have enhanced the company’s outlook. In August, the company secured a credit facility and agreed to sell its interest in the Cygnus gas project, establishing liquidity to fund its U.K. Bacchus and Rochelle development projects. The recent discovery at West Rochelle may add significant reserves to enhance the economics for the Rochelle development. And over the last few months, the company announced participation in several high IP rate Haynesville wells, which marked a nice start for the firm’s new development initiative in U.S. shale plays. ******************************************************** Above is from today's update put out by CKCooper, full report can be downloaded at finance.groups.yahoo.com (you need to join the group to download, its fast & easy & free). Notwithstanding that this CKC guy acknowledges in the text of his report that Bacchus is expected to come online in mid '11, his '11 projection (which calls for a 19% decline in oil production next year vs. this year) clearly does not take this into account. He is the low man on both revenues and earnings, out of 5 analysts that have put out '11 projections. He's clearly overworked, and just forgot to update his '11 projection. Per CKC's report END is trading at an EV/EBITDA multiple of 7x. When you adjust his '11 EBITDA projection for the gaff noted above this comes down to 5.5X. This is an absurdly low multiple for a company that has such dramatic production growth ahead of it.