NBF report october 17 and 18 They still maintain an overweight rating and a 13 $ price target. Here a summary:
- The submissions and hearing process is estimated to take 6 months,
- Cabinet Approval remains a parallel process; litigation risk likely in either scenario. If Cabinet approves the project the FMFN plan to file a "stay" (a request to stop the project) with the AER and the Alberta Court of Appeal and file for litigation against the Alberta Cabinet. A stay is considered an extraordinary remedy and not a common practice. We believe that Cabinet is presently considering the approval decision and is concerned of any pending litigation from either FMFN or Brion Energy depending on their decision.
- Regardless of the outcome, Cabinet approval processruns in parallel. ATH's legal counsel is still of the view that an appeal runs in parallel and will not impact final approval from Alberta Cabinet, expected in October. This is backed by precedents (they provide a few examples for mines)
- After Cabinet approval, the last steps include AER final approval and Environmental approval (2-4 weeks). Following this, the $1.3bln put with PetroChina is triggered. We expect advance of the funds within 4-6 weeks, placing proceeds on the books by year-end or early 2014.
Unfortunately the granted appeal creates more uncertainty for the Dover project and ultimately timing for exercise of ATH’s $1.3bln put with PetroChina. The company has taken contingency steps to increase liquidity (i.e. infrastructure option agreement, Peace River Arch asset divestiture package and scaled back capital plans). Absent of the put proceeds ATH has sufficient liquidity to mid 2014 ($200mln credit facility & $165mln infrastructure option agreement). A public process to find a partner for the Duvernay is ongoing and we anticipate an update before year-end. Industry activity is heating up in the play and we expect the process to be very competitive due to ATH’s strategic positioning (largest land package available in the oil transition window & ownership in infrastructure).
We are still of the view that there is significant underlying value in the asset base well beyond current trading levels. Under conservative assumptions we value the stand-alone business at
~$9/sh assuming the put goes through and downside to ~$6/sh.