Analyst Research Report Snapshot


Change in Management, Not Strategy




PI Financial Corp


26 Feb 2014





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Palliser Oil & Gas Corporation (V-PXL) $0.25 (Intra-day) Recommendation: Buy (unchanged), Target: $0.40 (unchanged) Change in Management, Not Strategy VALUATION/RECOMMENDATION: Palliser’s share price reflects a sharp reversal of fortunes that began in the second half of FY13. Not only did volumes slip from 3,000 boe/d to under 2,000 but netbacks were also compressed by lower pricing. Looking ahead, Palliser’s still boasts a large inventory (160 undrilled opportunities) and this is now complemented by an underutilized infrastructure network. At issue is how exactly PXL can fund the activity ramp required to capitalize on this assembled opportunity, especially as PXL has reached its borrowing capacity under its lending agreement. To this end, Palliser is exploring all of its options including JV and possibly outright sales. While the current scenario affords investors limited visibility, some comfort can be found in the level of discounting that the market is currently placing on PXL, which is currently trading at 14% of its $1.83 NAVPS. We are maintaining our BUY recommendation with a SPECULATIVE risk rating and our $0.40 target. Company Statistics Risk: SPECULATIVE Potential Return: 48% Basic Shares O/S: 63.9MM F.D. Shares O/S: 68.8MM Market Capitalization: $16MM 52-Week Range: $0.74/$0.25 30 Day Ave Trading Volume: 94,117 Enterprise Value: $57MM Financial Summary (FYE Dec 31) FY12 FY13e FY14e FY15e Oil (US$/bbl) $95.15 $98.00 $95.00 $90.00 Gas (US$/MMBtu) $2.83 $3.75 $3.75 $3.75 Liquids (bbl/d) 2,065 2,290 1,960 2,406 Gas (Mcf/d) 351 240 240 240 Boe/d (6:1) 2,124 2,330 2,000 2,500 Cash Flow (MM) $16.8 $14.0 $11.3 $20.3 CFPS (FD) $0.31 $0.22 $0.18 $0.32 Net Debt Y/E (MM) $37.3 $45.9.6 $46.7 $36.3 NAVPS (Engineering) $1.83 Price/NAVPS 14% EV/Prod ($000s/boe/d) $25 $27 $28 $26 EV/DACF 3.1x 3.8x 3.7x 2.4x Target Implied EV/DACF 3.5x 45x 4.5x 4.0x Corporate Information Palliser Oil and Gas Corporation is an Alberta-based company focused on High Volume Lift (HVL) at its heavy oil properties in the greater Lloydminster area.

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