QEC 1Q - figures in line, good cash conservation, limited news flow expected before the summer


Conclusion: 1Q results are in line, and cash conservation is good. There is no major news on Quebec. The next results will be test results from the TBR zone (non-shale zone) on the St. Edouard well in June, while the shale zones will be tested in the latter part of the summer. Before this, we expect the gas price development to be the main driver of the share price



1Q Figures

Questerre 1Q cash flow from operations was CADm 1.1, in line with guidance and expectations
This is down from CADm 2.8 in 4Q, mainly due to the low natural gas prices in North America
Cash stands at CADm 51.8 at the end of 1Q, down from CADm 54.3 at year end, reflecting participation in the two Forest Oil horizontal wells in Quebec


St- Lawrence Lowlands, Quebec

After the recent well results showing promising results from several zones, the company thinks ultimate capex can get down to as low as USD 1.0/mcf. This compares to our current estimate of USD 1.9/mcf, and could further reduce the break-even price of the project from the estimated USD 3.5/mcf
The company also points to that the recent well results from the St.David and La Visitation wells of 300-450 mcf/day produced from the same zone as the Gentilly well from last year which tested at 800 mcf/day, and that it thereby confirmed the geographical extent of this zone over a large area
The fourth well, St. Edouard, will undergo an open-hole test from the Trenton Black River formation later in May (likely with results in June), while the shale zones will be tested later in the summer
Further, Talisman is expected to drill its first horizontal test well into the most prospective Utica formation early 2010, and thereafter the first pilot production wells later in 2010
When it comes to the more disappointing Forest Oil horizontal wells from this winter, the operator plans to do another test of one of the wells during the summer




We have a BUY (High Risk) recommendation and NOK 32 Target Price on QEC