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Message: Pareto reiterate target price of 60 NOK (10 CAD)
I've copied this from the Norwegian forum. No link was provided but it does appear to be genuine. I'll add the link as soon as I can locate it...
An attractive entry point.
Questerre will report Q1 results on Friday 14 May. The next test results from the company’s Quebec acreage are expected to be released in Q3’10. Current share price reflects only 10% of the value potential; in our view this represents an attractive
risk/reward after the St. Edouard well in February provided a significant derisking of the Utica shale. BUY recommendation and NOK 60 (10 CAD) target price reiterated
Questerre will report Q1 results on Friday 14 May. The next test results from the company’s Quebec acreage are expected to be released in Q3’10. Current share price reflects only 10% of the value potential; in our view this represents an attractive
risk/reward after the St. Edouard well in February provided a significant derisking of the Utica shale. BUY recommendation and NOK 60 (10 CAD) target price reiterated
Strong balance sheet.
We expect Q1’10 operating cash flow around zero, down from CAD 0.6m in Q4’09, mainly due to somewhat lower production from the company’s conventional assets. During the quarter, the company raised around CAD 125m through issuance of 30 million new shares. We estimate this to have increased Questerre’s net cash position
from CAD 51m at the end of 2009 to CAD 164m at the end of Q1’10. We now estimate the company to be financed for participating in the development of the Utica discovery in Quebec for at least another two years. Thereafter we believe it is likely that debt will be the main source of financing for the Utica development. Next Quebec test results expected in Q3’10 Questerre and the operator Talisman (TLM) have after the very
strong test results of the St. Edouard 1A well finalized drilling of the second horizontal well in the program, Gentilly 2HZ. In addition, Talisman has drilled a third horizontal well at the Leclercville location in the same area, but where Questerre does not participate. A fourth horizontal well is expected to be drilled over the coming months. All these three latter wells are expected to be tested directly after each other, which means that the next test result is likely to be ready sometime in Q3. The wells are placed in different parts of QEC/TLM’s Quebec acreage, and as such we expect one or two of the wells which are placed in the less overpressured area to test at lower rates than the 5 mmcf/day St. Edouard 1A well.
We expect Q1’10 operating cash flow around zero, down from CAD 0.6m in Q4’09, mainly due to somewhat lower production from the company’s conventional assets. During the quarter, the company raised around CAD 125m through issuance of 30 million new shares. We estimate this to have increased Questerre’s net cash position
from CAD 51m at the end of 2009 to CAD 164m at the end of Q1’10. We now estimate the company to be financed for participating in the development of the Utica discovery in Quebec for at least another two years. Thereafter we believe it is likely that debt will be the main source of financing for the Utica development. Next Quebec test results expected in Q3’10 Questerre and the operator Talisman (TLM) have after the very
strong test results of the St. Edouard 1A well finalized drilling of the second horizontal well in the program, Gentilly 2HZ. In addition, Talisman has drilled a third horizontal well at the Leclercville location in the same area, but where Questerre does not participate. A fourth horizontal well is expected to be drilled over the coming months. All these three latter wells are expected to be tested directly after each other, which means that the next test result is likely to be ready sometime in Q3. The wells are placed in different parts of QEC/TLM’s Quebec acreage, and as such we expect one or two of the wells which are placed in the less overpressured area to test at lower rates than the 5 mmcf/day St. Edouard 1A well.
A very attractive entry point
Assuming an average IP (Initial Production per well) of 3,500 mmcf/day for the Utica development, we see an unrisked value potential of NOK 70 (11.8 CAD) per share. When including the value potential from the Lorraine shale and the value of Questerre’s 4.25% royalty on Talisman revenues in the area, the unrisked value potential is around NOK 170 (28.8 CAD) per share. At the current share price of NOK 16, we think the risk/reward is very attractive, as the St. Edouard 1A well was a major step towards proving the commerciality of the Utica shale. We reiterate our BUY recommendation and NOK 60 TP.
Assuming an average IP (Initial Production per well) of 3,500 mmcf/day for the Utica development, we see an unrisked value potential of NOK 70 (11.8 CAD) per share. When including the value potential from the Lorraine shale and the value of Questerre’s 4.25% royalty on Talisman revenues in the area, the unrisked value potential is around NOK 170 (28.8 CAD) per share. At the current share price of NOK 16, we think the risk/reward is very attractive, as the St. Edouard 1A well was a major step towards proving the commerciality of the Utica shale. We reiterate our BUY recommendation and NOK 60 TP.
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