Buy Reco by... PI FInancial???
Corporate Update aUaApril 18, 2011
Rating: Buy rget: N/A N
N
(unchanged) (unchanged)
Operational Pace Remains Slow, but Size of the Prize Expands EVENT``: New lands expand resource potential. Anglo’s latest accumulation of ~135 sections targets a variety of Devonian age oil formations in Central Alberta, some of which include the Duvernay. Anglo’s next Nordegg HZ well now appears most likely to spud in August—a month later than anticipated. (With more than a half dozen industry horizontals planned for the Nordegg this summer, Anglo is probably better off being a month behind this crowd.) The Southwest SK Bakken wells are still a go for late April – weather permitting. Each of these verticals costs $500k and carries a 50% probability of success but offers four to eight horizontal follow-ups. Anglo’s pending reserve report should quantify past Bakken success -- look for 5 mm barrels –mostly within un-developed categories.
Impact``: Land Strategy -- Ready, Fire, Aim! Several participants at recent land sales demonstrated sniper like precision –along with a number of hefty bids. Anglo’s participation was, by comparison, more akin to carpet bombing. That said, when the dust settled, we figure Anglo spent about 3% of the capital and picked up ~50% of the land. Given the difference in strategies, we are not suggesting Anglo’s lands are on par with the higher-priced parcels. That said, all these lands are being acquired in pursuit of plays that are still in the earliest stages of development. Moreover, we are quick to reject any argument suggesting that any individual participant has yet demonstrated a particular mastery of these emerging plays. Evaluation of these lands is underway but we are not looking for Anglo to be early out of the gate with a drill rig. The approach on these lands, much like the Nordegg, will be to take advantage of increasing activity levels and to have industry help show them the way forward.
Valuation/Recommendation``: Like the 269 sections already held in the Nordegg, these new Central Alberta lands are impossible to accurately value at this time. Accordingly, we do not offer a valuation or target for Anglo. Our Buy recommendation recognizes not only of management’s past track record for identifying (and capitalizing on) new opportunities, but of the sheer combination of small enterprise value ($28MM) and huge oil-prone land base (~400 sections). We reiterate our Speculativerisk assessments and note that our disclosures pertaining to this company have recently changed.
IMO we are trading sideways until we can get the reserves onto our balance sheet. See below link for info above
https://www.redwood-capital.com/documents/acg-apr18-11.pdf
Kash