David Pescod On EQU Today Ah! Remember the good old days when commodity prices
were only going to go higher, resource stocks were the place
to be, and analysts had some credibility? Remember when
Equal Energy had more than a few analysts looking for doubledigits
and maybe $14 or $15? We wrote about a few of
them...silly us!
Equal Energy has had nothing but bad news over the last
two years and the stock chart kind of verifies that. Equal Energy,
for whatever reasons, has decided to bag much of their
assets in Canada and some of their dealings on Friday of last
week have created some interest and some people suggest
it’s good news for TriOil Resources.
Equal announced that it closed an agreement with another
unnamed Canadian Energy Company whereby Equal sold its
Lochend Cardium assets for cash consideration of $62 million.
Those assets sold include production of about 525 boe/
d (93% light oil) based on the most recent 30-day production
average, related infrastructure and also undeveloped land.
This means that Equal is basically getting out of most of
its assets in Canada, supposedly to concentrate in Oklahoma.
But we hope they have a little bit more luck, or at least for
those few shareholders that are left in Canada.
Taking the other angle on this, we noted that Equal had
12.5 net sections of land in the Lochend Cardium whereas
TriOil now has 70 net section of Lochend Cardium rights.
Canaccord’s Brian Kristjansen writes, “Of TriOil’s last
stated production of 2,500 BOE/d, approximately 1,000 BOE/d
was being produced in Lochend. Translating the Equal sale
metrics across a range of land values and producing BOE
metrics, nets an estimated range of $2.25 to $3.07 per share in
Lochend value to TriOil. Ascribing a conservative $400/acre
metric and the associated producing BOE metrics (see following
page) to the company’s 1,500 BOE/d of ex-Lochend production
nets an estimated total corporate value of between
$4.33 to $4.62 per share.”
He continues, “The Equal Energy sale metrics reinforce
our valuation of TriOil and serve to highlight the conservatism
of current risked upside estimates. We are reiterating
our BUY recommendation on TriOil and consider the company
to be one of our top junior picks. Our 12-month C$5.00
target remains based on a 5.0x 2013E EV/DACF multiple
supplemented by $0.42 of risked Cardium upside potential.”