SCOTIA HAS 18.50 PRICE TARGETCompany Profile Trilogy Energy Corp. is a gas-weighted Canadian Intermediate E&P company, focused in Kaybob and Grande Prairie, Alberta. Over the past several years, Trilogy has allocated the majority of its capital to Kaybob, which currently accounts for ~90% of total production. Trilogy's Kaybob asset features multiple Montney light oil pool, Montney gas, and liquids-rich Duvernay gas potential. Business Mix (Based on revenues unless otherwise noted) Production: 60% Natural Gas, 40% Oil and NGLs (100% Canadian) Comparable Companies (TSX unless otherwise noted) RMP, KEL, BIR, AAV Recent Update Text as of 9DEC14 . TET announced the elimination of its $0.03 monthly dividend (annual savings of ~$53 million) and a $250 million capex budget for next year. . No more divvy. While on the surface the elimination of its dividend could be taken as a negative, we view this as a smart move, as we think investors that own the stock did not typically own TET for its dividend. The 2015E capex program at $250 million is below our forecast of $350 million, but production guided at 35,000 boe/d is a positive (flat to 2014E levels). At US$65/bbl WTI and $3.75/mcf AECO, TET is spending 1.25x forecasted cash flow of ~$200 million. TET also noted that it is seeking outside sources of capital to develop its Duvernay acreage. We provide a valuation of TET's Duvernay with TET estimates run at US$65/bbl & $3.75/mcf AECO - at those commodity prices, TET trades at 7.5x 2015E EV/DACF. If we assume $5,000 of value per Duvernay acre, then TET's underlying production base trades at 5.1x 15E EV/DACF. . Love the Risk/Reward. While we think there is potential for more downside given oil's current trend, we love the risk/reward trade-off at these levels. In our opinion, the stock is trading like the company is going bankrupt - which we believe is far from the case. We believe that the Duvernay will work, and that once commodities rebound, the stock could be a double or better from here. . Our rating remains SP; our target moves to $18.50/share (prev. $20).