CALGARY, Sept. 12 /CNW/ - Record high commodity prices this spring and
summer have translated into exceptional returns for investors in junior oil
and gas explorers and producers and conventional energy trusts, a survey
released Monday shows. However, even with 25 percent average gains for juniors
and 18.5 percent average total returns for trusts over the five-month period
from April through August, there are still some relative bargains in the
energy sector based on a comparative analysis of their second quarter results.
Iradesso, a Calgary-based investor relations firm, compares on a
quarterly basis the share prices, financial results and operating results of
publicly traded Western Canadian conventional energy trusts and junior
explorers and producers. The latest version of the iQ report includes 77
Western Canadian junior oil and gas companies as well as 35 conventional
energy trusts. For the survey, a junior has been defined as an oil and gas
company that produces between 500 and 15,000 barrels of oil equivalent (boe)
per day. All the companies surveyed trade on the TSX or TSX Venture Exchange.
Total return for trusts is measured as the cash distributions paid to
investors combined with the appreciation in the unit price.
According to the report, most of the gains in share prices over the five-
month period from April through August were achieved in the last two months.
One method used to value juniors and trusts is by calculating a company's
enterprise value per boe per day of production, where enterprise value is the
share price multiplied by the average number of shares outstanding plus net
debt. Using August 31 share prices, net debt at the end of the second quarter
and second quarter average production rates, juniors had a median enterprise
value of $78,274 per boe/d while trusts were slightly lower with a median
enterprise value of $76,000 per boe/d. In the two years of published iQ
reports, this is the first time juniors came out with higher median production
valuations than trusts.
Juniors have a wide range of enterprise valuations with some companies
looking very inexpensive. The three junior companies with the lowest
enterprise value to boe/d of production included Grand Banks Energy (TSXV:GBE)
at $31,710 per boe/d, GEOCAN Energy (TSX:GCA) at $38,424 per boe/d and
Rival Energy (TSXV:RGY) at $39,462 per boe/d.
Energy trusts get valued in a tighter band with the lowest multiples
coming from Baytex Energy Trust (TSX:BTE.UN) at $48,096 per boe/d, NAV Energy
Trust (TSX:NVG.UN) at $49,029 per boe/d and Daylight Energy Trust (TSX:DAY.UN)
at $52,002 per boe/d.
When cross-referenced with other measurements such as cash flow netbacks
per boe, debt to cash flow levels and quarterly production growth rates it is
possible for investors to still identify bargains in the sector.
Although the energy sector has been delivering remarkable returns for
investors, Iradesso president Peter Knapp emphasizes that no one knows whether
we're at the peak of a commodity price cycle or simply partway through an
upward climb.
"Since we can't be sure of where we are in any given cycle, it is most
important to make sure we are invested in the strongest and most opportunistic
companies and trusts," Knapp said. "This way it doesn't matter what happens on
a macro level, our investments will make the best of the situation and provide
the best return to investors."
The iQ report helps investors do a sweep of the energy sector to pinpoint
industry trends and companies or trusts that deserve further research. The
report offers several parameters for examination of the industry. Other
highlights of the second quarter 2005 report include the following:
- Total daily production for the 77 juniors was 193,000 boe, while
total daily production for the 35 conventional trusts was
significantly greater at 853,000 boe.
- For juniors, median production per share was up one percent from the
first quarter of 2005 to the second quarter of 2005. For trusts, the
median production per unit decreased four percent from the first
quarter to second quarter. These statistics suggest that it is a
challenge for both juniors and trusts to add production in the
current environment on an accretive basis.
- For juniors, median cash flow multiples are up again on a quarter-
over-quarter basis. The median enterprise value rose to 9.1 times
annualized cash flow from 6.1 times in the second quarter of last
year.
- Juniors have surpassed trusts in terms of their market valuations on
an enterprise value per boe basis. The median for juniors was $78,274
per boe/d, three percent higher than trusts valued at $76,286 of
enterprise value per boe/d. Last quarter trusts were higher by five
percent.
- Juniors continue to be weighted more to natural gas than trusts. For
juniors, the median weighting was 68 percent natural gas production,
while trusts had a median weighting of 58 percent natural gas.
Two comparative charts from the iQ report have been included below
showing the relative valuations of juniors and trusts based on enterprise
value per boe/d of production.
<<
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Junior Companies Enterprise Value per boe/d Production ($/boe/d)
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Grand Banks Energy 31,710
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Dynamic Oil & Gas 37,795
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GEOCAN Energy 38,424
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Rival Energy 39,462
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Choice Resources 41,314
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Tiverton Petroleums 46,833
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Tempest Energy 47,362
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Zapata Energy 47,550
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Diaz Resources 49,253
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Blue Mountain Energy 49,478
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Endev Energy 50,548
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Terra Energy 51,591
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Hawk Energy 52,267
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Great Plains Exploration 52,414
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Espoir Exploration 52,930
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Purcell Energy 53,119
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Grey Wolf Exploration 59,312
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Diamond Tree Energy 60,312
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AltaCanada Energy 61,014
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Berens Energy 61,372
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Masters Energy 61,659
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Caribou Resources 62,096
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Delphi Energy 65,869
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SignalEnergy 68,216
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Raven Energy 69,249
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Find Energy 69,518
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Storm Exploration 69,577
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Pilot Energy 69,825
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Wrangler West Energy 70,788
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Peregrine Energy 71,534
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True Energy 73,857
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Bison Resources 74,749
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Luke Energy 75,818
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Stylus Energy 76,365
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RSX Energy 76,545
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Canada Southern Petroleum 76,759
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Gentry Resources 77,072
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Atlas Energy 77,601
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Burmis Energy 78,274
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Bulldog Energy 84,057
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Grand Petroleum 86,328
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Real Resources 88,602
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Clear Energy 89,838
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Exalta Energy 90,035
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NuVista Energy 92,513
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Prairie Schooner Petroleum 95,496
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ProspEX Resources 96,009
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Iteration Energy 98,284
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BlackRock Ventures 102,943
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Celtic Exploration 107,419
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Canex Energy 110,064
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Breaker Energy 110,083
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Cinch Energy 112,299
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Galleon Energy 112,658
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Canadian Superior Energy 115,453
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Crew Energy 115,494
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Veteran Resources 116,032
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Twoco Petroleum 120,618
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Kick Energy Corporation 125,566
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Rider Resources 125,670
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C1 Energy 126,251
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Titan Exploration 133,154
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Mission Oil and Gas 133,891
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Cordero Energy 133,911
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Innova Exploration 138,754
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Petrobank Energy and Resources 142,868
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Kereco Energy 147,155
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Bear Ridge Resources 148,782
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Rock Energy 167,495
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ProEx Energy 172,980
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Duvernay Oil 193,910
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Cyries Energy 218,009
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Accrete Energy 218,146
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Capitol Energy Resources 219,877
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Highpine Oil & Gas 233,684
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Birchcliff Energy 237,905
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West Energy 390,959
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Conventional Energy Trusts Enterprise Value per boe/d Production
($/boe/d)
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Baytex Energy Trust 48,096
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NAV Energy Trust 49,029
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Daylight Energy Trust 52,002
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Acclaim Energy Trust 55,926
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Harvest Energy Trust 59,406
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Pengrowth Energy Trust 62,603
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Penn West Energy Trust 64,515
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Paramount Energy Trust 66,018
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TKE Energy Trust 69,322
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Petrofund Energy Trust 70,295
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Crescent Point Energy Trust 70,589
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Trilogy Energy Trust 73,882
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Primewest Energy Trust 73,990
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Zargon Energy Trust 74,315
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Esprit Energy Trust 74,565
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NAL Oil & Gas Trust 74,710
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Ketch Resources Trust 75,713
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Advantage Energy Income Fund 76,286
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Viking Energy Royalty Trust 76,788
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Fairborne Energy Trust 76,809
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Bonavista Energy Trust 77,730
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Enerplus Resources Fund 78,429
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Progress Energy Trust 80,769
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Shiningbank Energy Income Fund 82,437
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Sequoia Oil & Gas Trust 83,731
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Focus Energy Trust 85,239
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ARC Energy Trust 85,874
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Vault Energy Trust 101,523
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Bonterra Energy Income Trust 106,970
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Starpoint Energy Trust 110,029
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Thunder Enegy Trust 110,360
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Freehold Royalty Trust 119,216
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Enterra Energy Trust 120,286
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Peyto Energy Trust 151,286
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All the information compared in the iQ report has been publicly
disclosed. The report is available free of charge to investors who contact
Iradesso Communications through an online form available at
www.iradesso.com/i/IOR/newsserviceform.html. Media outlets may call Iradesso
directly through the contact information below to obtain a PDF or hard copy of
the report.
Iradesso Communications Corp. is a Calgary-based company specializing in
full-service investor relations, corporate communications and design. Iradesso
works on a monthly retainer and project-basis for a numerous oil and gas
companies and energy trusts.
>>
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