Aitken Creek pipeline is CKE's emerging midstream asset Great catch, Bean and Dunn. Stars are lining up for Chinook Energy (CKE) thanks to the recent positive news from LNG Canada project and the construction of the Aitken Creek Section, Spread 2 of the North Montney Mainline Project.
Those who sell CKE now for less than CAD$1,000 per Montney acre deserve to lose their shirt in the stock market given that net debt will be less than CAD$1 million in December 2018 (see guidance) and current Enterprise Value is just CAD$50 million.
They obviously ignore that CKE's Aitken Creek pipeline, a 55 miles pipeline, gradually becomes a key midstream asset for CKE. It was on care and maintenance after its purchase from NVA and generated the first revenue (toll revenue) in late 2017, see the excerpt below from the latest report. CKE generated more revenue (toll revenue) in 2018 compared with 2017 from this midstream asset YoY (see the excerpt below) and it can continue to increase its revenue effective 2019 upon the completion of the North Montney project.
Additionally, TRP's North Montney project that will be completed in early 2019 will significantly increase the value for Aitken Creek pipeline, so CKE can either sell it to the offset operators or use it for its own Montney-related operations in the area.
It also goes without saying that this midstream asset increases CKE's Enterprise Value on a potential deal with the offset operators (Black Swan, Saguaro, Storm etc.)...... " Consistent with the reduction in the production & operating expense for the second quarter, we expect lower operating costs on a boe basis throughout the remainder of 2018 compared to 2017. As a result of our Birley/Umbach facility expansion and with third party restrictions eased, our July production volumes have increased. This is expected to further lower, on a boe basis, the contribution from fixed operating costs relative to total operated costs. There are also no significant scheduled McMahon Plant turnarounds. We do not anticipate significant maintenance costs on our operated facilities.
We started reporting new toll revenue in June 2017 from our 12” Aitken Creek pipeline which is directly connected to the Alliance Pipeline. This resulted in higher processing and gathering revenues during the current reporting periods compared to the same periods of 2017. This pipeline also passes through our Birley, Martin Creek and Black Conroy lands and provides us with optionality upon the future development of a gas plant to flow directly to the Alliance Pipeline with access to Chicago markets, BC Station 2 via Enbridge’s T-North pipeline or connect to TCPL’s North Montney expansion when completed in 2019 or 2020. "