Big Changes in One Fell Swoop
PI Financial Corp
23 Oct 2013
Available for Immediate Download
CORPORATE UPDATE Oct. 22, 2013 MANITOK ENERGY INC. (V-MEI) $2.97 RATING: BUY TARGET: $4.00 (unchanged) (unchanged) Big Changes in One Fell Swoop FORECAST/OUTLOOK: We expected management to duplicate its Stolberg success by proving up another potential core area with the Foothills thrust belt (i.e., Cabin and Quirk Creek). However, we did not expect the Company to enter into an exploration deal that offers a diverse mix of drilling opportunities on EnCana freehold lands at its Entice property on the southeastern Alberta plains. We will not see the effects of Manitok’s early exploration work until late summer 2014E (committed capex program of $22M in 2014E, $33M in 2015E and $51M in 2016E). In the meantime, near-term drilling will focus on the ~20 gross Stolberg locations, 3 farm-in (pay 100% to earn 70%) exploration wells at Quirk Creek, 1 Brown Creek LRNG well, a shallower Cardium well at Cabin Creek, and an exploration well testing up to ~15 sections with known potential for 5 new Cardium structures. VALUATION/RECOMMENDATION: Our $4.00 target price is based on applying 2014E multiples of 6.7x EV/DACF and $77,000/boepd. Manitok currently trades at 4.1x EV/DACF and $43,000/boepd multiples based on our 2014E estimates. Company Statistics Projected Total 35% Risk SPECULATIVE 52-Week Trading Range $3.49/$1.93 Shares Outstanding, Basic (000) 70,086 Shares Outstanding, Diluted (000) 76,612 Insider Holdings 9.8% Market Capitalization (000) 208,156 Enterprise Value (000) 221,739 Financial Summary (FYE Dec. 31) Production Oil & Liquids (bbl/d) 960 2,323 3,476 Natural Gas (mcf/d) 8,558 10,944 15,121 Total Volumes (boe/d) 2,386 4,147 5,996 % Oil /Liquids 40% 56% 58% Financial 2012A 2013E 2014E Revenue ($M) $37,349 $88,042 $118,463 Net Income ($M) -$2,656 $23,935 $24,729 DACF ($M) $18,545 $47,832 $62,192 Capex ($M) $49,892 $76,050 $70,325 Net Debt ($M) $10,674 $39,140 $48,465 Net Debt/CF 0.6x 0.8x 0.8x CFPS $0.29 $0.63 $0.80 Valuation 2012A 2013E 2014E P/CFPS 10.2x 4.7x 3.7x EV/DACF 11.8x 5.2x 4.1x EV/Boepd $91,728 $59,638 $42,797 EV/P+P boe $14.6 $17.0 $17.2 P/NAVPS 105% Corporate Information Manitok Energy Inc. (V-MEI) is a domestic junior oil and gas producer targeting conventional oil and liquid rich natural gas (LRNG) pools in the thrust belts found along the Alberta Foothills and the plains of SE Alberta.