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FirstEnergy Capital pounds the table for Legacy Oil and Gas

Plus: Imperial and Husky report, and Crescent Point makes another acquisition

Nov 2, 2012

by Max Fawcett

Sell-side recommendations should always be viewed with a critical eye, but it’s hard to ignore FirstEnergy Capital’s analysis of Legacy Oil and Gas (TSE:LEG) and the upside opportunity it presents for investors. In a report on Legacy’s third quarter operational update, it noted “production that is on track with both annual and year-end guidance, highlighted by continued im¬provements in both well results and capital efficiencies in all key areas of operations. These improvements will not only have an impact on corporate production growth initiatives, but also its upcoming year-end reserve report that we anticipate will be far more com¬petitive than last year.” FirstEnergy is confident that Legacy will meet its 17,900 boe/d exit guidance, and has maintained its top pick ranking and the $14.75 price target it has on its shares. Legacy is currently trading a few cents above $7, so FirstEnergy is predicting a double for the stock.

Meanwhile, as Alberta’s energy sector continues to roll through third-quarter earnings season, a pair of the province’s larger companies reported decent results. Husky Energy’s (TSE:HSE) production for its most recent quarter average 285,000 boe/d, down from 309,000 boe/d in the previous year’s quarter. Still, its net income rose marginally from the previous year, from $521 million to $526 million. Imperial Oil (TSE:IMO) did a bit better, reporting a 21 per cent increase in year-over-year profits due largely to the margins it earned on its refining capacity.

And Crescent Point (TSE:CPG) announced another acquisition, this time paying cash (and assuming a bit of debt) to acquire the privately-held Ute Energy Upstream Holdings in a deal worth $861 million. As its name suggests, Ute operates in Utah – the Uinta Basin light oil play in the northeast part of the state, to be precise – and it currently produces around 7,800 boe/d. Crescent Point’s 2012 exit guidance is expected to increase from 100,000 boe/d to 109,000.



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