National Bank research note -- RMP Energy (RMP; OP; $1T) last night provided investors with the results from the 4th well of its emerging Montney play Elmworth.
· Over the course of the first 30 days, the well delivered ~900 boe/d at 33% oil and NGLs – a good result, which compares similarly to the recent performance of nearby industry wells from CIOC and Velvet. So an in line result with peers could suggest some modest incremental upside for the stock given perhaps more muted expectations but we think this event is generally more neutral/slightly positive;
· As such, analyst Brian Milne is gaining increased comfort around the prospectivity of RMP’s lands, along with maintained conviction that RMP could one day be a take-out candidate in the order of >$1/share (represents nearly a double);
· Further, Brian suggests that a logical buyer would be private-equity backed Velvet Energy, which is licensing heavily to the north and south of RMP activities. Would RMP would be a logical go-public vehicle for Velvet? We’ve heard this suggested before…dunno, timing is a bit of a question mark here we suspect if a consideration at all go-forward. We’ll see. In our opinion, the corporate strategy here is to position the company for an eventual sale vs. a longer term plan to grow into a much larger entity;