Scotiabank Energy Watch - March 20 Cardinal Energy - target price C$11.50; outperform
Cardinal Energy Ltd. achieved Q4/16 production of 14,616 boe/d, which was in line with our estimate of 14,966 boe/d. Cash flow per share (CFPS) of $0.19 was behind our estimate of $0.28 and consensus of $0.28. The underperformance was due to higher operating costs ($23.24/boe versus our estimate of $19.75/boe). Royalties were also higher than expected, at $5.57/boe versus our estimate of $4.85/boe. Cardinal acquired properties in its core areas of Wainwright during Q4 for $32.5 million. The company also announced that it will be suspending its dividend reinvestment plan (DRIP) and stock dividend program (SDP) in order to eliminate the associated dilution. Cardinal increased 1P and 2P reserves by 12% and 13% YOY, respectively. On a 2P basis, the company replaced 250% of its 2016 production. Cardinal also achieved 2016 1P and 2P FD&A costs, inclusive of changes to future development capital (FDC), of $7.71/boe and $7.26/boe, respectively. Cardinal’s $100 million 2017 capital program consists of the previously announced Mitsue acquisition, in addition to 18 gross wells drilled across its three core areas. The company maintains its 2017 production guidance of 16,800-17,300 boe/d (15% to 18% growth over 2016 annual production of 14,611 boe/d).
(Bryden)