from Scotia Daily Edge Parallel announced its 2014 budget and guidance.
Implications
■ Production stability task one. Parallel is targeting production of
7,100-7,300 boe/d, which is in line with our latest estimate of 7,158
boe/d. This is flat from Parallel's targeted exit rate in 2013 of 7,300
boe/d and includes the drilling of up to 15 gross wells. Capital for 2014
is targeted at $13.5M, also approximately in line with our estimate of
$14.5M. The targeted production levels are roughly flat year over year
as the primary return component for investors remains Parallel's yield at
~16%. We have tweaked upward our realized liquids pricing
assumptions given the improved market pricing.
■ Debt reduction task two. Parallel's 2014 budget features much of the
same as 2013, with low-cost production additions through workovers
and a modest drilling program. The company is clearly targeting debt
reduction as a primary objective ahead of its 2017 debentures
repayment. While liquids pricing at Conway has improved and should
be positive for cash flows, debt reduction continues to be a tall task at
current commodity prices (in our view).
Recommendation
■ We maintain our SP rating and target of $4.75/unit.