Post by
maramos98 on Aug 20, 2013 1:30pm
Canaccord morning coffee commentary
Novus Energy* (NVS : TSX-V : $0.82), Net Change: -0.02, % Change: -2.38%, Volume: 148,001 Can you teach me how to pull a rabbit out of a hat? Novus is expected to release Q2/13 results on August 23, before the market open. For Q2/13, Canaccord Genuity Energy Analyst Steve Toth, is forecasting production volumes of 3,844 boe/d with CFPS of $0.08, slightly below consensus of 3,939 boe/d and $0.08 (Bloomberg, based on six analysts). Novus had a quiet Q2 from operational perspective drilling six wells in June; the company ensured the need for trucking is minimized by tying in a number of wells and emptying oil storage tanks in anticipation of the harsher weather conditions. Out of the six wells in Q2, five were located in the new area of Marengo/Milton where it drilled and completed four wells in the first quarter. Initial rates from the first wells in the area have been encouraging with IP30 rates from two wells in Marengo averaging ~75 bbl/d, higher than its generic Viking type curve of 45 bbl/d. Additionally, Novus has licensed four wells in proximity to its superior performing wells in the eastern halo of the Dodsland pool where its previous nine wells had IP rates (~IP30) averaging from ~55 to 115 bbl/d. Novus’ formal value realization process remains one of the key catalysts for the stock; the process is now over eight months in and the precipitous decline in the stock price reflects an expectation the company will not be sold. The company is not completely tied to an outright sale, however; it has the balance sheet flexibility, large scale drilling opportunities, and critical mass required to grow organically in the current market environment. Novus is projected to grow its annual average and Q4 production volumes by 42% and 43%, respectively, representing one of the highest per share growth rates within Toth’s coverage universe.