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|billy_buffin: Jennings Capital Top Picks 2012 Target $10.50
2011 was not the kindest year for Bankers Petroleum. The share price started the year at $7.60, peaked at $9.92 in early March, but then declined after missing production guidance in Q2 and Q3. It is time to get over that.
The Company's current guidance is for exit production between 16,000 20,000 Bbl/d. We expect it to meet the minimum threshold. The missed production targets were a result of poor guidance, not nonperformance in the field. Production at the beginning of the year was 12,100 Bbl/d, so the expected exit
will be a 32% increase. The wells followed a steeper initial decline than expected, so much of the new drilling merely replaced early declines rather than built up overall rates. This did not decrease the reserves per well it merely extended the time required to get them all out. Even if we discount the value of the Company's 2010 year end 2P reserves by an extras one or two years to compensate, we still calculate Bankers' NAV at $6.70 and $6.27, per share respectively, before any additions from this year's drilling program.
In 2012, we expect continued production growth of ~30%. The big catalysts, however, will be reserve increases:
Bankers has been expanding the drilling area to chase prospective resources in the Marinza and Gorani formations outside of the established producing area, so mapping at year end should increase assigned 2P reserves. Some wells may have also penetrated the deeper Bubilima formation in the north part of Patos Marinza, which could lead to new reserves there.
The project everyone has been waiting for, of course, is the steam pilot. The first injection period is expected to be ~60 days, concluding in early February. After that, we expect approximately one month of hot water production, and then the first meaningful production rates in March. Once
injection is finished on the first well, the steamer will be hooked up to the second for its 60-day injection period, so following the same time line, we expect those results in May. The Company's modelling indicates initial rates of between 400 and 500 Bbl/d for each well. If successful, Bankers has 1.2 billion barrels of contingent resources that depend largely on thermal recovery. We are not going to suggest that two wells will validate that entire resource volume as reserves, but even 10% would represent a 50% increase in the Company's 2010 year end 2P reserves.|
|sander4709: Nice results.
Share price hasn't bounced yet, maybe today the market will wake up.|
|gippy: Little news? The announcement on 2nd Nov regarding recruitment of new personnel experienced in heavy oil recovery is very significant for Albania. Current reserves of 93 Million barrels are less than 5% of the 1.96 Billion barrels of original oil in place. If these guys can increase reserves and production by using enhanced recovery techniques for Bankers by the same magnitude as their previous success then this will justify the current share price increase.|
|wassapper: Gippy - just found this in Resource Investor. I don't hold the stock, but you could of course look to buy n a contrarian basis?!
What's Happening to Bankers?
By Michael J. DesLauriers
23 Jun 2006 at 06:15 PM EDT
TORONTO (ResourceInvestor.com) -- Investors that follow RI are probably familiar with the Palo Duro shale play in Texas. There are a number of Canadian listed juniors operating in the area, every one of which has seen its share price come off significantly in the last six months. Most notable amongst these is Endeavour Financial backed, Bankers Petroleum [TSX:BNK]. Shares in Bankers closed the day at 68 cents, well off their C$1.98 high, and seem to be in absolute freefall.
What's the Problem?
Bankers has lots of cash, as the institutions that took down the stock at a buck and higher are no doubt painfully aware. The company also has a massive land package in the Palo Duro, where initial drilling seems to have the company on track, and indicates the potential for a company-making, Barnett sized reserve. In Albania, Bankers' production is steadily on the rise and the company is aiming for 10,000 15,000 bpd in the next four to six years.
Let's have a look at the company's share structure. According to the latest numbers the company has 404 million shares outstanding and 443 million shares fully diluted.
Despite the fact that Bankers is currently producing north of 3,000 bpd in Albania, their cash flow is paltry. This is a result of high costs, high royalties and taxes and laughable netbacks.
In the Palo Duro, while good things would appear to be happening, time is certainly not on your side, and shale gas will clearly always be discounted in any valuation or buyout scenario.
Furthermore, the work is extremely expensive. An industry insider told RI that Bankers is having all sorts of difficulties with their equipment, and effective extraction technology is far from a given at this point.
At today's close of 68 cents, BNK has a market capitalization of C$275 million. Apart from the fact that there is nothing going on to get and keep investors excited, the market cap is the simple answer to the question: What's the problem? Albania doesn't come anywhere near justifying the current market valuation, and the value of Palo Duro is more or less in the eye of the beholder, at least for the time being.
Nobody wants to pay that much when everything is years away and there is nothing to get excited about now. Moreover, should everything actually pan out for Bankers in the Palo Duro and Albania, what's the most that you might make on your money, five years hence? A triple of quadruple if all if the stars align?
Those of you that follow your correspondent's work are aware that the resource sector is currently offering those types of returns on a number of quality vehicles in a much shorter time frame and with a much higher degree of certainty.
The path of least resistance for Bankers is to remain lower, because even at these levels shares in the company are too expensive based on what you can see and what you can't see. More importantly, the sector is rife with product, and the opportunity cost of holding Bankers makes no sense on a relative risk to reward basis.|
Bankers Pet share price data is direct from the London Stock Exchange