Appears to be dead money in 2013!
Recent Update Text as of 9JAN13
. Angle Energy provided an ops update and announced 2013 guidance.
. Q4 CF in Line. Angle announced Q4 CF of $25-26MM (in line due to a higher oil
wtg) and production of 13.8-14 mboe/d, -7% to our estimate due to reduced ethane
recoveries at a third-party facility, unscheduled plant downtime, and the
delayed tie-in of a Rock Creek well (included in recently sold Edson assets). We
continue to like NGL's focus on oil projects and see further growth in the oil
weighting in 2013.
. 2013 Guidance. NGL announced a 2013 capital budget of $145-160MM to drill ~45
(36 net) wells this year and construct an oil battery at Harmattan. Cardium oil
will account for ~75% of the drilling budget, with the balance pegged for
Mannville liquid-rich gas. With current volumes at 11.3 mboe/d, guidance of
11.3-11.7 mboe/d for the year includes limited growth in volumes. On account of
the lower production forecast, our 2013 CF estimate drops by 9%.
. Neutral Stance. Valuation is attractive at 5.1x 2013E EV/DACF, and in our
opinion management has done a good job of transitioning the asset base. That
said, we believe the market is looking for higher growth rates than guidance
suggests: ~10% using the midpoint exit rate of 12.5 mboe/d vs. the current rate,
while spending 1.6x CF.
. Our rating moves to SP (from OP) and our target to $5 (from $6) reflecting a
more muted outlook for 2013.