K vs N vs P - cut to the chaseIf Nuvista is the baseline at $11.32, then Pipestone has upside to $7 (its undervalued) and Kelt has upside to $16.71 (extremely undervalued).
The baseline as previously discussed is the land at Wembley/Pipestone and more generally, Nuvista. Using Q3 numbers (will be adjusted again after Q4), Nuvista produced 51,005 boepd. The equivalent production for Pipestone given the land size relative to Nuvista would be 32,940 and 38,253 for Kelt (notwithstanding a lot of that production is from other plays - more on that later). At a $10,000 IP365 and infrastructure capital efficiency (lots of data out there that this is a reasonable guesstimate), reaching that production level would require addl capex (and debt) of $186M for Kelt and $$82M for Pipestone.
Of course we must use EV and not Market Cap (be wary of online market cap as they are often wrong). Kelt's debt including current assets less current liabilities less long term debt less deficit other long term liabilities (includes lease liabilities but excluding deferred tax and abandonment liabilities) was at Q3 43M, Pipestone was 381M and Nuvista was 796M. Including the aforementioned addl capex to catch up to Nuvista production volume, Kelt debt would be $229M and Pipestone 463M.
There is also the matter of Kelt's extra Montney land rights, ~ 240,000 acres. I assign a value of $480M and further adjust the debt above (Kelt ends up with a surplus of 251M).
Corporate netback at Q3 was $20.03 for Kelt (despite lower oil/condensate), $19.33 for Pipestone and $17.33 for Nuvista. So adjusting for those, and again using Nuvista as the baseline EV of $3.36B, we get an adjusted (for production increase and addl debt) EV for Pipestone of 2.4B and 2.9B for Kelt.
Subtracting the adjusted debt, we get a $1.969B market cap for Pipestone (relative to Nuvista) , 24% upside and a $7 target (relative to Nuvista'a $11.32 share price).
For Kelt, we add the extra land for an adjusted market cap of 3.16B 287% upside and a share price target of $16.71 relative to today's current price of $5.82 and Nuvista's $11.32 (notwithstanding that the value of Kelt's extra lands will not be static.)
Bottom line, Kelt is tremendously undervlaued today relative to Nuvista and PIpestone (and probably many others) in my opinion.
Obviously a lot of Kelt productoin is not from Wembley but as they ramp up Wembley, their liquids mix will only increase which should translate into even better netbacks relative to current and the 2 aforementioned peers. There is also an underlying assumption about well EUR, costs etc (that they're all the same), that may obviously not be the case although it will get reflected over time.
I will update these numbers once all the Q4 #s are in. I may add TVE as well though of course their lands are completely different (I would compare only with Nuvista).
GLTA.