Petrobakken reports much stronger numbers, stock up 65% from lows
Petrobakken (PBN), the company that each shae of Petrobank enetiles you to 1.03 shares of, reported numbers this week. Im following petrobakken more closely now because I took off my hedge some time in September, due to PBN becoming ridiculously cheap. Market rumors about a dividend cut and an analyst report that highlighted the risk of a large cash payment coming due in February 2013 drove the price down to a low of $6.
I doubt petrobakken will cut the dividend unless they absolutely have no other choice, because this is where petrobank gets all their funding from, and management still believes in petrobank. PBN would rather cut some grow capex or sell off some undeveloped assets instead. However, they would obviously prefer to grow their way out of this problem.
This seems to be the case. While production numbers for Q3 were crappy, again due to a late spring breakup and flooding in Saskatchewan, the early look at Q4 seems to be amazing. They managed to get october production to average above 46k BOE/D and indicated early November is already above 47.5k BOE/D. Thus they increased their exit guidance to over 49k BOE/D, which was their previous high end of the range. This means they their wells are producing at high rates, their drilling program is progressing well, and there are no more screwups occurring. Further, their netback in Q3 was quite high, meaning from an Opex side, they are executing well.
If petrobakken can exit at 49K +, and continues to perform moderately well in 2012, there is virtually no chance of a dividend cut or an asset sale. It would be a $20 stock again, which is double from where it is now.
I might reinstate my long petrobank short petrobakken hedge if the spread gets any more negative but for now im happy to have the positive exposure to petrobakken. Management has a proven track record and is now finally starting to show it. If the street regains confidence in this name again it will be a very profitable story indeed.
Heres a link to the quick 7 page earnings report. It contains some oil industry terms but I suggest you read it and google what you don’t understand. http://www.petrobakken.com/wp-content/uploads/2011/11/PBN-2011-11-08-PressRelease.pdf