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One up, one down

Two market darlings saw brisk trading in their shares after they announced their second quarter results - for better and worse

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

Aug 13, 2014

by Max Fawcett

If you missed the boat on Badger Daylighting (TSE:BAD) and were waiting for an opportunity to get in, well, now’s your chance. After running up to $43 and change in mid-March on the heels a three-for-one stock split and continued earnings momentum, the stock had pulled back of late. And after a brief rally earlier this month it’s taking a shellacking this morning after its second quarter results disappointed investors. It was down as much as 20 per cent this morning on what Bloomberg described as “lower profit margins on slower activity in North America and wet weather in Saskatchewan.” Investors might also be tapping the brakes on the story a bit, given that there isn’t much preventing other companies from building their own hydrovac trucks and trying to steal some of Badger’s lucrative market share.

Painted Pony (TSE:PPY), on the other hand, posted second quarter results that investors were much happier with. The company beat analyst expectations on both cash flow per share (35 cents versus 33 cents) and production (15,029 boe/d versus 14,900 boe/d), while its well innovations continue to impress. AltaCorp’s Jeremy McCrea put a $20 target on Painted Pony’s shares – a nearly 70 per cent upside – on the basis of those technological improvements and the ever-present possibility of a takeover offer. “In the past year, we’ve discussed ever improving completion techniques being utilized in the Montney including slick water, open-hole completions, and most recently, paired-parallel completions. These changes in engineering and better IP rates would force the street to expand PPS growth expectations, and once again, the outstanding quarter (and revised production guidance higher) has demonstrated PPY has been successful.”

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The big picture? It hasn’t changed for McCrea. “Although the company faces near-term facility constraints, management’s proven track record, PPS expected to increase 70 per cent into 2015, a balance sheet at only 0.9x (2015), top-performing Montney wells that look to still be improving, and 2,000+ locations over 203 Montney sections, there remains few names that compete with Painted Pony on a fundamental basis. With LNG becoming more a reality and Painted Pony scoring top marks across the board, we believe the company is a logical take-out candidate as final investment decisions are made over the next couple years.”

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