For Your Reading PleasurePeerless acquisition should provide 25% bump to Petrobank production
Posted: November 26, 2007, 4:00 PM by David Pett
Energy
Petrobank Energy and Resources Ltd.'s acquisition of Peerless Energy is expected to increase production by more than 25% in each of the next two years, according to UBS analyst Andrew Potter.
On Thursday, Petrobank reached an agreement to acquire Peerless Energy (PRY) for $334-million including the assumption of approximately $60-million of debt.
"The main motivation for the transaction is Peerless exposure to the Bakken resource play in SE Saskatchewan where Petrobank already has a large and rapidly growing asset base," Mr. Potter told clients in a research note.
"Peerless brings an incremental 1,900 bbl/d of Bakken production to Petrobank along with approximately 65 net drilling locations (4 wells per section) and brings Petrobank's inventory on the play to 565 net locations (4 wells per section)."
Due to the acquired volumes plus a more aggressive Bakken drilling program, the analyst increased his 2008 production estimate by more than 28% to 36,500 boe/d and his 2009 estimate more than 25% to 41,600 boe/d.
He added that the transaction was 8% accretive to his 2008 and 2009 cash flow per share estimate and approximately 4% accretive to his 2008 and 2009 estimated earnings per share, resulting in a 1% bump to his net asset value on the company.
Mr. Potter's "buy" rating and $65 price target for Petrobank (PBG/TSX) remains unchanged.