United States

Analyst Research Report Snapshot


Palliser Oil & Gas - Reserve growth, production decline




Octagon Capital Corp.


26 Feb 2014





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• Palliser provided an update on 2013 year end reserves and operations. • 2P reserves increased 19% to 9.4 mmboe at the end of 2013 from 7.9 mmboe in 2012. Palliser replaced 274% of 2013 production. Finding, development, and acquisition (FD&A) costs were $24.90/boe (including future development capital), in-line with its four-year historical average. • Palliser is trading at just 15% of NAV. Palliser’s 2P reserve value (using Sproule’s pricing forecasts and a 10% discount rate) totaled $153.3 million. After including estimated undeveloped land value and adjusting for net debt, the Company’s NAV is $118 million, or $1.83/share (fully diluted). • Operations update: Production in Q1/14 is expected to be 1,800 to 1,900 boe/d, continuing the decline from Q4/13 production of 2,037 boe/d and Q3/13 production of 2,339 boe/d. The issues impacting production (i.e., higher water cuts at certain wells at Manitou Lake and Edam) have taken longer than anticipated to rectify. In addition, capital expenditures have been limited as cash flow has been negatively impacted by declining production and increased propane costs. Palliser’s net debt at the end of Q1/14 is expected to be $49 million, leaving little room on its $52 million bank facility. • Palliser noted that Allan Carswell (COO) is no longer with the Company. Kevin Gibson (CEO) will assume his responsibilities.

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