Coastal Eng Share Discussion Threads

[blue86] 14/5/2013 13:17

Macquarie
Canada
1Q13 results; exploration results mixed
Event
• Coastal reported 1Q13 results after market open. 1Q13 production averaged 23,163 boe/d (20,460 bbl/d offshore), largely in line with our estimate of 23,229 boe/d (20,612 bbl/d offshore). FFPS of US$0.85 was ahead of our estimate of US$0.75 due to sales from inventory.
• Production in the month of April averaged 25,700 boe/d (22,800 bbl/d offshore), which is in line with our 2Q13 estimate of 25,577 boe/d (22,960 bbl/d offshore).
• The Songkhla M-01 well encountered oil shows in the Eocene reservoir but the company declared it non-commercial. The Bua Ban Terrace A-01 well encountered 52 ft of net pay in the Miocene with 26% porosity and 313 ft of net sand in the Eocene. While a majority of the zones were water-bearing, several zones showed high oil saturation levels.
Impact
• 1Q13 and current production. With production disclosed through the Thailand Department of Mineral Fuels, 1Q13 results were in line. April production is in line with recent disclosure on 'current' production, and on track to meet our 2Q13 estimate. However, annual production guidance of 33,000 boe/d remains an aggressive goal.
• Exploration results – mixed. Although results were disappointing at Songhkla M, the prospect contributed just C$0.19/sh to our RENAV. With the confirmation of oil migration in the Terrace area, we wait for further drilling to provide clarity on commerciality and the extent of the structure.
Earnings and target price revision
• RENAV down C$0.19/sh, 2013 EPS down 3%, no change to target.
Price catalyst
• 12-month price target: C$25.50 based on a 0.75x RENAV & 4.2x 2014 EV/DACF (50/50 weight) methodology.
• Catalyst: G5/50 exploration well, offshore Malaysia appraisal drilling.
Action and recommendation
• Despite a sluggish start to 2013, Coastal is still set to deliver superior production growth compared to its peers. However, we believe that achievement of production guidance (aggressive, in our view) will continue to be the focus for investors in the medium-term. Exploration success could also boost the stock in the interim. Trading at just 0.8x core NAV and 2.6x 2014 EV/DACF, we reiterate our Outperform rating on Coastal.


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PDF (611 KB, 5 pages)
Analyst(s)
Macquarie Capital Markets Canada Ltd.
David Popowich
[phone]
[e-mail]

Bryan Fast
[phone]
[e-mail]
May 14 2013
CEN CN Outperform
Price (at 20:00, 13 May 2013 GMT) C$19.26

Volatility index High
12-month target C$ 25.50
12-month TSR % +32.4
Valuation C$ 25.50
- 0.75x RENAV & 4.2x 2014 EV/DACF (50/50 weight)
GICS sector Energy
Market cap C$m 2,188
30-day avg turnover C$m 4.1
Market cap US$m 2,162
Number shares on issue m 113.6

________________________________________
Investment fundamentals
Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue m 761.2 994.7 1,317.2 1,383.7
EBITDA m 482.8 698.1 992.2 1,043.5
Reported profit m 224.4 376.7 636.9 672.7
Gross cashflow m 356.0 482.8 732.3 772.1
CFPS US$ 3.01 4.12 6.25 6.58
EPS rec US$ 1.93 3.23 5.43 5.74
EPS rec growth % 353.1 67.1 68.4 5.6
Total DPS US$ 0.00 0.00 0.00 0.00
Total div yield % 0.0 0.0 0.0 0.0
ROA % 58.4 58.0 57.8 42.8
ROE % 66.9 60.4 55.7 37.2
EV/EBITDA x 4.8 3.3 2.3 2.2
Net debt/equity % 5.9 -10.5 -28.5 -36.8
P/BV x 5.2 2.8 1.5 1.1


________________________________________
CEN CN vs TSX, & rec history



Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, May 2013

(all figures in USD unless noted)

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[dukedosh] 14/5/2013 11:48

The market will over sell this news but should bounce back when people get a handle on the facts. These are fickle market times, market is in show me the money mode. It does but still hammers the share price .

[blue86] 14/5/2013 10:57

First Energy
Market Reaction: 1Q13 financials are solid. However, we believe that the market will interpret this release negatively given that the Songhkla M and Bua Ban Terrace wells did not encounter commercial hydrocarbons at their main targets. However the presence of oil at both wells does somewhat improve the chance of success on the remaining prospects at Bua Ban terrace and South and East of Songhkla M. Our combined risked NAV for both wells was C$0.71/£0.48.
• In 1Q 2013, Coastal's EBITDAX was US$152.5 mm (FCCe: US$138.5 mm) with EBIT of of US$128.3 mm (FCCe: US$117.8 mm) and net income of US$53.0 mm (FCCe: US$77.5 mm). Cashflow from operating activities was US$53.8 mm (FCCe: US$92 mm). The difference from our operating cash flow estimates is largely due to a negative movement of US$45 mm in working capital.
• Production over the period was 23,163 boe/d including 20,460 bbl/d offshore Thailand, in line with the figures previously reported by the Thai authorities. Production over the month of April was 25.7 mboe/d including 22.8 mbbl/d offshore with the Bua Ban main platform and two wells currently shutdown. This is below our overall average production forecast for 2Q13 of 27,570 boe/d.
• The Songhkla M well encountered water bearing sands with pervasive oil shows in the Eocene with average porosity of 11%. The 3D survey acquired last year extends much further to the south and a trend of Eocene closures has been identified over a 2,000 acre area. This could be unlocked with hydraulic fracking.
• The Bua Ban Terrace A-01 well encountered 7 ft of net pay in the Lower Oligocene with 16% porosity (that was not expected) suggesting a stratigraphic trap between the well and the Bua Ban North A-02 well. The Eocene contained 313 ft of net sand with 18.2% average porosity and was mostly water bearing but there were several zones with log indications of high oil saturation levels. Reservoir quality appears to be better than previously encountered in these sands. Gas readings in conjunction with the pay zone in the Lower Oligocene confirm oil migration in the Terrace area; somewhat addressing the main geological risk of the play. This could be interpreted as encouraging for the remaining prospects at Bua ban Terrace, which hold over 100 mmbbl Prospective resources.
• The Bua Ban Terrace well also encountered 52 ft of net pay with 26% average porosity in the Miocene of Bua Ban North, which was thicker than the 40 ft of prognosed pay. This could have a positive impact of the 2P reserves at Bua Ban North.

[marben100] 14/5/2013 09:28

Need to correct an error in my previous post, on re-reading the statement: the Terrace well did contain 52' of net oil pay in the Miocene - which is rather good. Market reaction seems well overdone to me.

[cwa1] 14/5/2013 09:17

Thanks blue86

[blue86] 14/5/2013 09:10

Credit Suisse
Coastal Energy (CEN.TO)
Elephant Elusive, Zebra Escapes; Lower TP

Rating: OUTPERFORM [V]
Price (13 May 13, C$): 19.26
Target price (C$): (from 34.00) 33.00
12/12A: 2.01
12/13E: 1.82 (from 1.93)
12/14E: 2.04 (from 2.06)
12/15E: 2.01 (from 2.03)

■ Q1 Production Inline, CF High: Coastal reported Q1/13 production of 20,460 bbls/d, which was inline with our estimate of 20,500 bbls/d. Average Q2/13 production to date is ~22,800 bbls/d. Q1/13 cash flow was US$99 mm, compared to our estimate of US$64 mm, primarily due to greater liftings.
■ Elusive Elephant on the Terrace: Coastal's Bua Ban Terrace A-01 well encountered 52 feet of net pay with 26% porosity in the Miocene within the existing Bua Ban North fault block. The company then further extended this well into the North Terrace fault block, which was estimated to contain 138 mmbbls of resource potential (the elephant) in the Miocene and Eocene. This extension found 7 feet of net pay in the Lower Oligocene, which is uneconomic, and the Eocene was largely water bearing. Of the original 138 mmbbls in upside in multiple independent fault blocks, we estimate roughly 39 mmbbls in the Eocene have been impacted, leaving still 99 mmbbls ($15 un-risked) left to chase. Most surprising is that this well is currently producing 500 mcf/d, whereas other fields have only trace amounts of gas.
■ Zebra Escapes: The Songkhla M prospect (13 mmbbls, $2 un-risked) was drilled and the Miocene was wet while the Lower Oligocene was not present, with an oil bearing Eocene section that is a future frac candidate. However, a larger trend of this Eocene may need to be determined before a frac program proceeds.
■ Recommendation: We reiterate our Outperform rating and lower our TP to C$33 (was C$34). Although these most recent exploration results were somewhat disappointing, there remain significant exploration runway. Trading at ~0.8 times 2P NAV, we believe CEN is undervalued.

[marben100] 14/5/2013 09:08

"Water bearing" means what it says: the wells drilled did not contain recoverable oil: the reservoir sands were saturated with water, not oil (except in the Eocene for Songkhla M). IMO that's the main reason for the negative market reaction this morning. However, the wells did demonstrate the presence of good reservoir sands and have added to Coastal's understanding of the geology.

So far (and early market reaction is often wrong, IME), the market seems to have ignored the significant comments from Randy. Those comments indicate to me that a) whilst there was no oil in the Terrace well as drilled, he is optimistic of finding oil elsewhere in the structure; b) there is useful Eocene discovery at Songkhla M.

I remain comfortable with my Coastal position - but have topsliced heavily previously (and readded some in early April), keeping my position proportionate & banking profits.

NB I am no expert and stand to be corrected in my understanding of the explo. update.

Cheers,

Mark

[ricky46] 14/5/2013 09:04

I thought the update was decent as well diabhal, I think people want buster wells everytime and then sell and panic when it dont happen.

[diabhal] 14/5/2013 09:01

I thought the update was good, and more oil is definitely good. Making it more likely to be a takeover target with a bid over 23 now. Surprised at the drop. Not sure what the market was expecting. Perhaps our Canadian friends will have saner heads this afternoon.

[ricky46] 14/5/2013 09:00

Duke I've held these for a few years and they get sold off all the time I'm hanging in there but judging by the trading this side of the pond I reckon these are going down bigtime in Canada later I reckon we might be able to buy some of these at below a tenner, what do you think?

[dukedosh] 14/5/2013 08:57

We're trading at a massive discount to NAV now and still in good shape to see production and reserves rise.

Time to keep your head on I reckon and not get shaken out on the cheap.

[blue86] 14/5/2013 08:57

lol - if you think the exploration results were priced in your having a laugh. the stock was bid at 23 and they rejected so any small exploration drilling misses in the long work programme they have is wildly overdone. wildly

[addison17] 14/5/2013 08:37

Yes, same here Melf, the financials are quite positive, but there must be something in the technicals to explain the share price drop.

[melf] 14/5/2013 08:32

Please could someone explain this excerpt from the statement to a non oily like me...."The well encountered an extensive section of excellent quality Miocene reservoirs which were water bearing"
Is this good or bad? The miocene reservoirs are excellent quality but water bearing.... I don't understand.
Thanks.

[rivaldo] 14/5/2013 08:32

Hmmm...pretty mixed production and exploration results. I sold some of my position this morning in lots at 1238p, 1201p and 1181p to protect profits.

I can see the share price falling back to 1000p-1050p again now, and maybe even back to 800p if it goes back to chart low points etc. At the right time hopefully I'll be able to buy back in.

[ricky46] 14/5/2013 08:20

Rome was'nt built in a day!

[dahhad] 14/5/2013 08:13

Not enough!

[ricky46] 14/5/2013 07:50

More oil then.....

[dahhad] 14/5/2013 07:29

Good or not?

[thegreatgeraldo] 13/5/2013 23:26

Cheers, I was wondering about the increase in receivables, looks like lumpy oil sales late in the quarter (oil sales receivables up from $35 mill to $117 mill compared with Q1 '12), which explains the modest after-tax cashflow. (Production was broadly unchanged from Q1 '12.)

[marben100] 13/5/2013 23:10

Full Q1 report here:

[sg31] 13/5/2013 22:12

Update



Q1 2013 Financial Highlights
• The Company reported Q1 total production of 23,163 boe/d, up from year ago levels of 22,773 boe/d. Offshore production totalled 20,460 bbl/d, a slight decrease from year ago levels of 21,031 bbl/d. Offshore production was impacted by several factors, including longer than expected completion times for the hydraulic fracturing program at Bua Ban South, delayed production from two horizontal wells at Bua Ban North due to the initial installation of "swelling packers" designed to reduce water production and the Songkhla A-10 well being down for a majority of the quarter awaiting pump replacement. Onshore production was 2,703 boe/d, up from 1,742 boe/d in the same period last year due to stronger gas demand in Thailand.

• EBITDAX for Q1 2013 was $152.5 million, 19% higher than the $128.4 million recorded in Q1 2012. Revenue and EBITDAX were driven higher by increased lifting volumes. Crude oil inventory was approximately 188,115 barrels at March 31, 2013, the revenue from which will be recognized in the second quarter.

• Operating costs declined 8% year over year on a per barrel basis to $19.90 / bbl as the Company realized the benefits of costs reductions related to the purchase of previously leased production facilities.

• The Company announced successful discoveries at Songkhla A in two exploration wells which were drilled into previously untested fault blocks on the western side of the platform.

Operations Update

The Company recently completed the drilling of one exploration well at the Songkhla M prospect and one appraisal/exploration well in the Bua Ban North and Bua Ban Terrace Area.

Bua Ban Terrace

The Bua Ban Terrace A-01 well was drilled to a depth of 5,900 feet TVDSS. The well penetrated the Miocene interval within the existing Bua Ban North field. The Miocene contained 52 feet of net pay with 26% average porosity, which was thicker than the 40 feet of prognosed pay. The well then penetrated the Lower Oligocene and Eocene intervals on the western side of the fault in the Terrace area and encountered 7 feet of net pay in the Lower Oligocene reservoir with 16% porosity. The Eocene contained 313 feet of net sand with an average porosity of 18.2 %. Very high gas readings persisted throughout drilling of the Eocene sections. Although, the majority of the zones in the Eocene were water-bearing, there were several zones with log indications of high oil saturation levels. These log readings, in conjunction with the pay zone in the Lower Oligocene and high gas readings throughout the Eocene, further confirm oil migration in the Terrace area.

Songkhla M

The Songkhla M-01 well was drilled to a depth of 9,200 feet TVDSS. The well encountered an extensive section of excellent quality Miocene reservoirs which were water bearing. The well also encountered 57 feet of net sand in the Eocene reservoir with pervasive oil shows. The Eocene sand section had average porosity of 11%, which is below the Company's conventional commerciality threshold.

Randy Bartley, President & CEO of Coastal Energy commented:

"Coastal Energy had another successful quarter in the first three months of 2013. The second quarter has also started well with offshore production averaging 22,800 bbl/d and total Company production averaging 25,700 boe/d during the month of April. The Company drilled two successful exploration wells at Songkhla A, making discoveries in two previously untested fault blocks on the western side of the platform.

"The results of both exploration wells yielded positive data points for our exploration portfolio.

"The Bua Ban Terrace well was drilled into the same Terrace fault block as the previously drilled Bua Ban North A-02 well, which penetrated the Lower Oligocene to the south of this location and contains a massive section of high quality, water bearing Lower Oligocene sands. The encounter of Lower Oligocene net pay in this well, combined with the A-02 results, points to a potential stratigraphic trap in the Terrace fault block that is pinched out between the Terrace A-01 well and the Bua Ban North A-02 well.

"At Songkhla M, we encountered oil shows in both the Miocene and Eocene intervals. The Miocene had high levels of oil saturation, providing further confirmation of oil migration in this high potential section on the eastern side of the Songkhla basin. The M prospect is located at the southern limit of our existing legacy 3D survey. However, the 3D survey acquired last year extends much further to the south and a trend of Eocene closures has been identified over a 2000 acre area. Given our success in hydraulically fracturing the Eocene interval with similar characteristics on the western side of the basin we feel that we have identified a significant trend for hydraulic fracture development in the Eocene."

[cwa1] 09/5/2013 14:59

Well, FWIW(not much, I know) Selftrade are currently limiting online buys to a maximum of.....50 shares.