current TBE share priceis so far off from the real value of this company. Here's a solid reminder from Canaccord of where TBE can go in the future ... (this was published on August 16th, after Q2 results)
REGAINING MARKET CONFIDENCE
Investment recommendation
Twin Butte released second quarter results that met expectations on
both production and cash flow. TBE reiterated it remains on track to
meet its exit production guidance of 22,500 boe/d and continues to
reinforce its commitment to the dividend with its Board of Directors
approving the current ($0.016/share/month) dividend level and payment
through year-end. We believe management will remain steadfast over
the near term by 1) meeting guidance and expectations, 2) proving up
and expanding its inventory and 3) reducing operating costs. Achieving
these three core deliverables in our view should result in improved
investor sentiment and stock price performance. Our BUY rating and
C$3.00 target price remain unchanged based on 0.9x NAV and a 4.9x
2015E EV/DACF multiple.
Investment highlights
Q2 in line. Q2 production averaged 21,109 boe/d in line with
CG/consensus of 21,041/21,360 boe/d despite seasonal weather
challenges. CFPS of $0.14 also met expectations.
Lighting up the Sparky. At Viking-Kinsella, it drilled a Sparky horizontal
well offsetting eight Conoco wells (average IP30 of ~155 bbl/d). At
Provost it drilled and completed two Sparky wells which it plans to bring
on-stream imminently. With ~100+ identified locations, initial success
will be important from a perceived upside value perspective and in our
view represents a material catalyst for the stock later this year.
Improved cost profile. Q2 costs trended lower by ~8% QoQ to
$20.94/boe given a decline in power and propane costs, higher activity
levels at Provost, and management’s cost containment efforts.
Valuation
Twin Butte trades at a 0.5x multiple to CNAV, a 3.3x EV/DACF multiple
and $40,800 per BOEPD based on our 2015 estimates, compared to peer
group averages of 0.8x CNAV, 6.2x EV/DACF and $73,300/BOEPD.
Hopefully we'll get an ops update and revised guidance by the end of September.