TSX:KEC - Post Discussion
Post by
retiredcf on Aug 26, 2022 9:11am
RBC 2
Their targets remain the same as previously posted. GLTA
August 25, 2022
Kiwetinohk Energy Corp.
Model Update – Consolidating Ownership at Placid
Our view: We update estimates for Kiwetinohk's announced acquisition of partner interests (Repsol) at Placid, a deal which features net production of 1,200 boe/d at a cost of $59 million (net), bringing KEC ownership to 88% (from 60%) across 79,000 acres at Placid. Albeit small, we view the transaction positively, as it consolidates regional ownership and facilities while providing a platform to accelerate Montney development over time. Our estimates increase modestly in both 2022 and 2023, reflective of added volumes offset partially by slightly higher operating cost assumptions.
Key points:
Deal summary. KEC will acquire Repsol’s interests at Placid, acquiring production of 1,200 boe/d (55% natural gas), 12.9 mmboe of 2P reserves, and an incremental 14.12% interest in the Bigstone sweet processing facility (updated ownership is now 39.31%, or 31 mmcf/d). Additionally, the deal adds to compression and condensate handling capacity at the 7-11 facility by 25 mmcf/d and 2,750 bbl/d, respectively. The deal is to be funded via the company’s existing bank facilities. For maps of the company’s operations and various processing facilities, please see our initiating coverage report here.
Transaction metrics. The deal was completed at transaction metrics of roughly $49,000/boe/d and $4.50/boe (2P), which we see as reasonable in the context of the current marketplace amid recent comparable transactions.
Updated corporate guidance. KEC has updated 2022 corporate guidance for the deal, increasing 2022E volumes to 16–18 mboe/d (from 15.5–17 mboe/d) but leaving capital unchanged at $290–310 million while adjusting operating costs slightly upward. Additionally, the company is reviewing the addition of another rig to the region in late 2022 or early 2023 with a view to growing regional volumes to 11.5–13 mboe/d (currently 7 mboe/d) by late 2023. Our current outlook calls for 2023 capex of roughly $400 million and average volumes of 26,000 boe/d, which incorporates the drilling of roughly 15 new Duvernay wells and 6 new Montney wells.
Updating estimates. Our estimates increase by +2% and +7% in 2022 and 2023 respectively, reflective of incremental volumes plus a slightly higher Montney growth wedge in 2023 at Placid.
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