Scotia has a $7.50 target Company Profile
Lightstream Resources is a light oil-weighted exploration and production company with
development assets in southeastern (Bakken and conventional Mississippian) and
central Alberta (Cardium). The company also has a suite of exploration assets in
north-central Alberta (Beaverhill Lake and Montney) and Northeast British Columbia
(Horn River and Montney). Lightstream produces ~46,000 boe/d (~80% light oil and
NGLs) and pays a $0.96/sh annual dividend. The company trades on the TSX under the
ticker LTS.
Business Mix (Based on revenues unless otherwise noted)
Production: 80% Oil, 20% Natural Gas
Comparable Companies (TSX unless otherwise noted)
CPG, LEG, TOG, WCP, BNE
Recent Update Text as of 4MAR14
. Lightstream announced 2013 reserves, a disposition, and an ops update.
. Disposition. LTS will sell 1,700 boe/d (66% gas) for proceeds of $112M,
corresponding to sale metrics of ~$65,900 per flowing barrel and $39.94/boe of
reserves, including FDC. Corresponding updated guidance is average 2014
production at 43.5-45.5 mboe/d (previously 45-47 mboe/d) and exit volumes at
45-47 mboe/d (previously 46-48 mboe/d). Capex guidance is unchanged
($525M-$575M).
. Reserves. 2P reserves came in at 199 mmboe (80% liquids), representing -10% YOY
growth (debt-adjusted/share), and included 7.9 mmboe of negative technical
revisions due to removal of bookings in SE Sask and some in the Cardium where
offsetting production was not economic. 2013 2P FD&A costs came in high at
$65.55/boe, owing to the negative revisions and capex spending that did not
contribute to reserves, including cost overruns and drilling to test new play
concepts.
. Thesis. While we think LTS is making the right moves to address the balance
sheet and sustainability, we see 2014 as a transition year and will wait to see
improved metrics before moving to a more aggressive stance. In our view, the
stock is appropriately valued at 4.7x 2014E EV/DACF, given the higher debt
levels (3.8x D/CF) and lower growth rates (-6% this year on a debt-adjusted
per-share basis).
. We maintain our SP rating and $7.50 price target