Pescod CommentOILEXCO INC. (T-OIL) $12.63 +0.36
While Oilexco has become a big story in the oil and gas
exploration game, there are still not a lot of analysts that
follow it. So it was interesting/intriguing last Friday when
Oilexco finally does an update on their North Sea developments
and suddenly you have two analysts looking at
the same news with two totally different views.
Jamie Somerville of Genuity Capital writes a four page
report featuring “Free cash flow generation delayed to
2009,” rates the stock a hold and gives it a target of
$17.00, down from $18.30.
Meanwhile Canaccord’s Fred Kozak, one of the first
analysts to ever follow the Oilexco story way back at
close to $3.00, looks at the same data and likes it. He
calls it a buy and gives it a $24.00 target. One of them
might be right.
The two big items was that Oilexco has announced a
huge capital budget for this coming year of $707 million
compared to the assumptions of many that it would be a
mere $400 million in 2008. Another bit of news was that
their production at Brenda/Nicol is at 18,000 to 20,000
barrels a day versus expectations in the market of 30,000
barrels a day.
There are reasons for this of course...the pumps aren’t
working and the suggestion is when those pumps are
turned on suddenly production should be back to the
28,000 level.
Somerville writes, “We are maintaining our HOLD rating
while reducing our target price to C$17.00 from
C$18.30. Although we remain attracted by near-term exploration
that could add substantial value, we think the
recent share price weakness will be extended due to
greatly reduced expectations for free cash flow generation
during 2008.”
Meanwhile, Kozak writes, “Our target price of C$24.00
(up from C$21.00) is based on 7.4 times 2008E debtadjusted
CFPS but only 3.3 times 2009E debt adjusted CFPS
and does not include the potential impact of the company’s
current exploration program. We note that with a higher
capital expenditure program in 2008 and 2009, the company’s
tax horizon has now been pushed out into 2010…”
The next catalyst Kozak writes, “The company plans to
commence its next phase of appraisal drilling at the Huntington
oil discovery. The first well is expected to be completed
in the first quarter of 2008. In addition, the company
will be drilling a delineation well at Kildare, which should
see results in early Q2/08.”
Kozak has a good 7-page look at the latest on Oilexco, so
anyone interested, just e-mail Deb at Debbie_
lewis@canaccord.com to receive a copy.
Meanwhile, Freddie also appeared on BNN yesterday in
an issue of “Stars and Dogs” where he called Oilexco a
“table-pounding buy”. As far as dogs, he suggested that
many of the juniors in Alberta are going to be hurting. An
interesting little piece to see for those who are fans of
Oilexco.
Meanwhile, we touch base with Ron Elgie (the PR guy for
Oilexco) who tells us that the pumps are now working, so
production for Oilexco over the next while should be ramping
up slowly, but nicely. Elgie also tells us that it’s amazing
the number of people calling in looking for updates on
Oilexco and whining about the status of Oilexco’s stock,
and have yet to figure out that it’s not just Oilexco, it’s everything
from brokerage stocks to mining stocks to oil and
gas stocks, the bank stocks, etc. Most veterans have an
idea of what’s going on out there. Elgie does say though
that “yesterday was no fun at all with the volume of cranky
calls.”
Meanwhile, there are some other analysts following
Oilexco’s stock. Josef Schachter has upped his target to
$25.00 and calls it a buy. Scotia McLeod has upped their
target to $21.00 and First Energy has upped their target to
$21.50. While Wellington West has a target of a mere
$17.00, they also consider it a buy as well. And as we said
earlier, there’s always a chance one of them might be right!