TD REMARKS Investment Conclusion
Bankers Petroleum Ltd. (BNK-T) announced a 12% increase in its 2P reserves, at the top-end of our
expectations for an increase of 4%-13%. However, a relatively full review of our modeling assumptions (in
comparison with those likely used by reserve auditors to estimate reserves and present values) has resulted in a
13% decrease in our Base NAVPS estimate and an 8% decrease in our Fully-risked NAVPS estimate. As a result, we are decreasing our target price to C$10.50 (from C$11.50). However, with Bankers’ share price
trading off by 6% yesterday in reaction to the update and Brent oil prices trading at over $10/bbl premium to
our $105/bbl assumption for 2012 (in contrast to oil prices in North America that are being stressed by new
local supplies), we maintain our ACTION LIST BUY rating, based on a 111% implied return to our reduced
target.
Bankers Petroleum was unable to grow the value of its reserves year over year (after taking out the effect of
higher oil price assumptions). However, the company’s assets and management can continue their long-term
trend of value-creating reserve additions in the coming years. As a result, given the size and growth potential
of its core asset, the company should be viewed as a take-out target, if equity markets do not value the
company closer to its Base NAVPS.
Key potential catalysts for Bankers include first results from a thermal pilot (Q2/12), continued production
growth (the company is targeting a 30% increase in average production levels in 2012), and gas exploration
drilling (first location expected to spud prior to the end of Q1/12).