From CIBC World Markets Lightstream Resources Ltd.
Dividend And Capex Slashed; Bakken
Assets For Sale; Maintaining SU
All figures in Canadian dollars, unless otherwise stated. 14-133434 © 2014
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December 15, 2014
Oil & Gas - Dividend Corporations
Stock Rating: SE C T O R UN D E R P E R F O R M E R
Sector Weighting: M A R K E T WE I GH T
Key Ratios and Statistics
12-18 mo. Price Target $3.00
LTS-TSX (12/15/14) $1.40
Key Indices: None
352-5--week Range Yr. EPS Gr. Rate (E) $1.18-$9.09 NM
Shares Outstanding 200.5M
Float NA Shrs
Avg. Daily Trading Vol. 1,930,000
Market Capitalization $280.7M
Dividend/Div Yield $0.48 / 34.3%
Fiscal Year Ends December
Net Asset Value $3.00 per Shr
2015 ROE (E) NM
LT Debt $1,535.9M
Net Asset Value Common Equity $2,000.0M
Convertible Available Yes
CF per Share 2013 2014 2015 2016
Current $3.43A $2.91E $1.74E $1.72E
Prior $2.88E $2.05E $2.12E
Estimates ( Valuation (Dec. 31 Dec. 31))
P/CF-Curr 0.4x 0.5x 0.8x 0.8x
P/CF-Prior 0.5x 0.7x 0.7x
EV/DACF
2014E 2.5x
2015E 3.7x
2016E 3.6x
Company Description
Lightstream (previously PetroBakken) was spun out of PetroBank Energy's
Canadian Business Unit and became a publicly traded entity on October 6,
2009.
www.lightstreamresources.com/
What's Changed
As expected, Lightstream announced today that it is slashing its
monthly dividend by 63% to $0.015/share (from $0.04), and
indicated that it if crude prices remained weak it would "review"
both its dividend and spending levels further. The company also
announced a reduced 2015 capital budget of $190-$210MM (down
59% YOY from ~$490MM in 2014) which is expected to result in
average and exit production of 30,000 to 32,000 Boe/d in 2015
(down 15% from our Q4/14 forecast of ~36,500 Boe/d). In addition,
Lightstream announced that it will seek to monetize all or part of its
Bakken business (which averaged 13,799 boe/d, 92% oil in Q3/14)
at some point over "the next 24 months" to pay down debt.
We have reduced our forecast for capital spending to $200MM in
both 2015 and 2016 (from $475MM, previously), while our
production forecasts for 2015 and 2016 fall by 12% and 18% to
32,000 Boe/d and 30,000 Boe/d, respectively, (from 36,500 and
36,500 Boe/d, previously). Under current forward strip prices, our
estimate for Lightstream's 2015E total payout ratio falls to 86%
(from 182%, previously, and versus the group at 142%). Our
forecast total D/CF for LTS falls to 5.4x in 2015 under the forward
strip - down from 5.7x, previously, but still above Lightstream's
12mth trailing total debt/EBITDA covenant of 4.0x. As such, unless
commodity prices improve we see the sale of the company's Bakken
assets as critical. We note that if LTS could sell its 13,799 Boe/d of
Bakken production for a modest $65,000 per Boe/d, proceeds would
total close to $900MM (versus the company's total debt of
~$1.5Bln).
Implications
We are maintaining our Sector Underperformer rating on
Lightstream with an unchanged price target of $3.00/share, which
equates to a 1.0x multiple to our Core NAV of ~$3.00/share. We
note that our Core NAV is contingent on our official CIBC commodity
price assumptions (which currently assume $US80/Bbl WTI in 2015).
Under forward strip prices, our Core NAV would fall to $0.75/share,
and the company would trade at a 2015E EV/DACF multiple of 4.6x
and a P/Risked NAV of 49% (versus the group at 6.8x and 86%)
with a current cash yield of 12.9% (versus the group average of 14.1%.