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Bankers hits its mark

Plus: FirstEnergy releases its top picks for 2013. First up: the oil sands players

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Jan 7, 2013

by Max Fawcett

Bankers Petroleum (TSE:BNK) kicked off the new year with a production update, and in the spirit of turning over a new leaf it managed to meet its relatively muted forecast. That’s a marked change from the strategy of over-promising and under-delivering that had gotten it into trouble with investors in 2012 and sent its shares down below $2. Despite heavy rains that negatively impacted production volumes in November and December, the company averaged production of 16,163 barrels per day, a figure that just barely missed FirstEnergy’s forecast of 16,300. On prices, too, the company was on target, realizing an average price of US$79.12 in the fourth quarter, or 72 per cent of Brent. Bankers’ management expects to push that up to 80 per cent going forward. As a result, FirstEnergy maintained its highly bullish $8 per share price target, a more than 160 per cent premium on where it trades today.

FirstEnergy also released its top ideas for 2013, ones that will be covered on this blog over the course of this week. In terms of its macro-level forecast it expects WTI to trade at US$93.50 per barrel, with Canadian differentials subject to continued volatility. It expects natural gas prices to weaken in the first half of the year on the back of underwhelming withdrawal rates and a decline in the market share of gas-fired power generation, but reduced drilling activity across the sector should give prices a bump in the second half o the year.

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As far as individual companies go, Michael Dunn has highlighted Athabasca Oil (TSE:ATH) as his top pick among oil sands players, putting a $17 price target on its shares. The imminent receipt of $1.3 billion from the exercise of its Dover put will leave the company with approximately $2.65 per share in net cash along with approximately 11,000 boe/d of light oil production, 2.7 million net acres of land rights in its light oil division and 9.4 billion barrels of recoverable bitumen. In addition, the recent joint venture between Encana and PetroChina implies a value of approximately $8.55 for the company’s 350,000 net acres of Duvernay land, and Athabasca’s management has indicated that it will seek a partner in order to exploit those resources. It all adds up to a company that’s worth considerably more on paper than its shares are trading at on the markets. “Needless to say,” Dunn wrote, “we see the upside potential on this stock as significantly higher than the current share price.”

Robert Fitzmartyn, meanwhile, takes a more contrarian stance in picking BlackPearl Resources (TSE: PXX) as his favourite oil sands play. “The company will address its financial overhang in the next six months, exploring non-core asset sales, the potential sale of one of its core proper­ties, and a potential joint venture,” he wrote. “No question, this is likely a contrarian pick within the scope of top ideas offered here, however manage­ment has astutely advanced its business plan through numerous cycles of heavy oil pricing volatility, and we believe the market will finance a high quality, low risk asset such as Blackrod.”

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