TriOil Resources Ltd TRIAF

Tri, Tri again; perseverance pays off for TriOil

[hawkowl1]

Canaccord Commentary

 

TriOil released an operational update last night highlighted by excellent new Dunvegan oil results and multiple type curve-beating Cardium production numbers. The highlight, in our opinion, was the 795 BOE/d IP30 rate of the company's initial Dunvegan success (30% w.i.) at Kaybob. The well is currently doing 475 BOE/d in its second month and has produced over 24,000 Bbls of oil to date. It has been followed up with a well testing 668 BOE/d (55% w.i.) over three days. This test rate is roughly a third of its predecessor, but given the deltaic geological interpretation of management's (see Figure 1 on the following page), we had no expectations that all future wells would be as high; and frankly a 668 BOE/d test is excellent, particularly in view of TriOil's 1,950 BOE/d exit rate. The Cardium well results were also excellent, with 5 (2.36 net) of the company's 6 (2.96 net) wells drilled in central and western Lochend averaging approximate IP30 rates of 446 BOE/d and the sixth (0.6 net)testing at 650 BOE/d. These compare to our average Lochend IP30 type-curve rate of 150 Bbls/d. The company's recent results are excellent, and should they continue we would be amenable to altering our forecast Lochend type curve. At present we are ascribing value to 25% of the company's total Lochend acreage, including the eastern edge, where results have not been as high, and as such we would prefer to see a broader sampling of western results before making the required adjustments. We are definitely positively biased nonetheless. Recommendation We are reiterating our BUY rating and C$7.25 target price. This remains based on a 5.5x 2013E EV/DACF multiple supplemented by
.76 of risked Cardium upside. TriOil currently trades at a low 2.8x 2013E EV/DACF multiple and $41,774 per BOE/d versus its Junior Peers in our coverage universe at 3.9x and $48,988 BOE/d (despite TriOil exiting 2012 at 70% oil and liquids).