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

To: JakeStraw who wrote (181224)	11/10/2013 8:51:05 AM
From: Ed Ajootian	1 Recommendation Recommended By Dennis Roth Read Replies (2) \| Respond to of 206326

Initiating Coverage with Outperform Rating and$4.00 Price Target Summary We are initiating coverage on American Eagle Energy (AMZG) with an Outperform rating and $4.00 PT. AMZG is a small cap E&P focused on Bakken/Three Forks (“3F”) development in Divide County, North Dakota. Its core Spyglass project encompasses ~25,500 net acres, where the company employs an aggressive operated drilling program. Additionally, it has established a strong track record of executing strategic acquisitions and financings to increase the size and scale of its assets and maximize value. Key Points Strong Three Forks (“3F”) Well Results. AMZG was producing from 25 operated wells at Spyglass, as of 9/30/13, the majority of which are 3F wells, and production results have been encouraging. The average 30- day IP rate for operated wells put on-line in 2012 was ~450 BOPD and its longer producing wells continue to average production rates of 150-250 BOPD after the first year of production. The solid IP rates and lower relative declines of these wells translate to favorable well economics by our estimates. Proven Ability to Execute Strategic Acquisitions. The company has entered into several transactions within the past year to acquire producing properties in Spyglass at attractive valuations that have helped establish a critical mass for AMZG. These acquisitions totaled ~$109MM and included over 1,700 BOEPD of production when the transactions were announced, less than $65,000/BOEPD, which is attractive given that it attributes no value to upside. We expect management to continue to execute similar transactions in the future that can enhance upside for the company at accretive valuations. Middle Bakken Upside With Encouraging Early Results. While development to date has mostly targeted the 3F formation, there is significant Middle Bakken potential that AMZG is beginning to derisk. The company's first Middle Bakken well of 2013 recorded an impressive one-week IP rate of 540 BOEPD and the well continued to produce nearly 260 BOPD in its eighth month on-line. Development in the Middle Bakken is accelerating and additional results from these wells represent potentially catalytic events. Furthermore, current proved reserves attribute little value to the Middle Bakken, leaving significant upside that can begin to be booked if the company can establish commercial production in this formation on a greater portion of its leasehold. Our $4.00 price target is supported by our estimated NAV, which allocates $2.06 for proved reserves adjusted for balance sheet items and $2.08 for unbooked Bakken/3F development at Spyglass. At current trading levels AMZG is trading around its proved value, indicating that an investor could secure significant upside at little cost, in our view. ******************************************************************* Above is summary from Northland report, which has a $4 PT on the stock. Complete report can be downloaded here, Northland AMZG report 10-21-13 . The report draws a comparison of AMZG's per-well economics to Oasis (OAS), which is most intriguing given how much higher OAS stock is being valued based on the traditional metrics vs. AMZG. There are some good charts in the AMZG presentation (thanks for the link Jake) that illustrate how low AMZG is being valued vs. its peers (including OAS). With any amount of luck they will announce an uplisting to the NYSE MKT in conjunction with their 3Q earnings report. This would be quite an achievement to say the least. I'm trying to think of who the last OTC E&P stock to uplist was and all I could come up with was Saratoga Resources, who uplisted in 7/11. Can anyone name an E&P company who has uplisted more recently than that?