Scotia Update Outperform $17 Event
■ NVA announced the start-up of the Keyera pipeline connecting NVA's Bilbo South property to the Simonette gas plant.
Implications
■ Up, Up & Away. The newly-completed Keyera pipeline started up on September 26th and NVA noted that corporate production levels have risen above & beyond the 20 mboe/d previously announced. Volumes through the pipe should continue to rise as the initial run-in period finishes. NVA has also signed a 10-yr take or pay commitment with SemCAMS for another 30 mmcf/d raw gas from NVA's Elmworth Montney block, taking total egress capacity for NVA to 77 mmcf/d.
■ Guidance Held... Despite Non-Core Sales. NVA has sold 1,400 boe/d for $49M + 3.5 sections of undeveloped Montney rights between NVA's Elmworth and Gold Creek properties. Production guidance was maintained for both 2014E (17.5-18.5 mboe/d) and 2015E (23.5-25 mboe/d) despite the disposed production and the unexpected third-party downtime disrupting 650 boe/d for Q4/14.
■ More Catalysts Coming. We think the liquids-rich Montney play in NVA's backyard is one of the top emerging plays in the basin, with a substantial number of industry wells set to come on-stream in 2H/14 which should drive momentum in the stock.
Recommendation
■ Maintain our SO rating and our target at $17/share.