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Painted Pony keeps running

Also: why Sentry's Mason Granger thinks that Bankers Petroleum should continue to soar

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

Jun 24, 2014

by Max Fawcett


Painted Pony Petroleum has had a hell of a run so far in 2014, but a pair of updates suggest that there’s still more – maybe a lot more – to come. Canaccord tacked on four additional dollars to its already aggressive $18 price target, noting that “despite the excellent share price performance since the start of the year (up 90 per cent), the market still does not fully appreciate both the pace of PPY’s production growth and the depth of its inventory, in our view.”

AltaCorp also bumped up its own target (from $17 to $19), arguing that the market isn’t properly pricing in the new well results it’s been seeing in the field. “Based on recent IP30 rates now at 11 mmcf/d, well paybacks look to be under 12 months (from 18-24 months) with the NPV/wells reaching upward of $14 million (from $7.2 million)…Based on consensus estimates, PPY is expected to have one of the highest CFPS (cash flow per share) and PPS (production per share) growth heading into 2015. This however could be further accelerated as the street starts reflecting a planned $294 million cap-ex budget for 2015 and IP rates from its more recently drilled paired-parallel wells.” There might also be some near-term catalysts that get the shares moving, AltaCorp said. “With PPY looking to update its corporate presentation – reflective of new well economics, combined with further LNG development, we believe there are multiple near term catalysts for the stock (not to mention a potential sale of its Saskatchewan assets, and further technological improvements that PPY will utilize on its next batch of wells).”

Speaking of companies that have done well in 2014, Sentry Investments portfolio manager Mason Granger tapped Bankers Petroleum (TSE:BNK) as one of his top picks during a lunchtime appearance on BNN’s Market Call. “I don’t worry about too much on this name,” he told host Mark Bunting, who was pressing him for some holes in the stock’s story. “Management’s solid, it seems like it’s licked its technical challenges, and it’s throwing off a lot of free cash flow. Things really seem to be lining up for the company, and on top of it they’re getting Brent-linked pricing.” The company continues to reduce its per-barrel operating costs every quarter, he said, and it’s even had some early success on its polymer flooding enhanced oil recovery efforts. If those pan out, the upside could be well north of $10 per share based on the company’s current per-barrel valuation metrics. It’s not just the metrics either, Granger said, noting that he’s had some people on the ground in Albania to kick the company’s wellheads. “We have a lot of confidence that what they’re doing on the ground is really world class,” he said.

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Granger also liked Spartan Energy (TSE:SPE), a popular pick of late among energy fund managers. His firm was a big shareholder in the previous iteration of Spartan, which was gobbled up by Bonterra Energy last year. “This third time, based on our relationship with the company and our knowledge of what they want to do, we’re a large shareholder in this as well,” he said, noting it could grow the production on its Saskatchewan light oil assets by 25 to 30 per cent over the next year. And he rounded his picks out with Trilogy Energy (TSE:TET), a gas-weighted player with “huge upside” to the Duvernay and a pretty modest debt load. “Their acreage in the Duvernay, we think, is in the sweet spot of the play,” he said. “There’s a lot of upside to come there.”

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