Painted Pony announces year-end reserves, financials, and an operational update. Impact: POSITIVE Painted Pony announces a 102% growth in Proved Developed Producing (PDP) reserves to 80.7 mmBOE (from 40.0 mmBOE as at year-end 2015) as the company spent 2016 converting undeveloped reserves into the PDP category through an active drilling program. This speaks to an increasing quality in the company's reserves bookings, with the PDP/2P ratio increasing to 10% (from 5%) and the 1P/2P ratio increasing to 54% (from 44%). This is the largest sequential improvement of any company under coverage that has reported reserves thus far. PDP FD&A costs were an impressive $4.32/BOE, the lowest of any company to report to-date—this is a metric that we believe investors will focus on disproportionately this year given the volatility in 2P reserves and cost assumptions. On that note, the 2P FD&A metric is irrelevant given a $288mm reduction in Future Development Capital (FDC) relative to a $204mm capital spending program in 2016. Furthermore, a combination of lower FDC and higher capital spending now results in Painted Pony booking nine years of capital spending (at 2017 levels) in order to convert undeveloped reserves. This is down significantly from historical levels as Painted Pony was historically an outlier in terms of the number of years booked in FDC. 2P NAV10 per share (based on evaluator price assumptions) increases by 24%, with all inputs moving in the right direction. This places Painted Pony in the top quartile so far this year relative to the broader coverage group. Q4/16 production and CFPS were a slight beat compared with our estimates, but net debt was quite a bit lower due to a more conservative spending program in Q4 than we had otherwise anticipated. Due to ongoing drilling and completion activity, the company forecasts that Q1/17 production will average between 35.5-37.5 mBOE/d, which is below the 40.0 mBOE/d reported productive capacity. TD Investment Conclusion Reserves metrics were positive across the board, and we would classify the overall reserves report as best in class. Our target price increases to $16.00 (from $13.50), and we maintain our BUY recommendation.