Here's DnBNOR's findings from the Q4 report. A followup to the Q4 preview I posted last week. Again it's from within my online bank so there's no link provided. Btw - I'm travelling back to Canada (Edmonton & Jasper) in March. Last time I was over the SP experienced a massive jump - I hope history repeats itself... LOL

Questerre reported Q4 EBITDA above our forecast, mainly driven by lower than expected royalties and G&A. Quarterly production was 605 barrels per day, compared to our forecast
of 633. There was no major news on the Utica developments in Quebec in the report. We reiterate our BUY recommendation and have placed our price target under review.

• Questerre reported Q4 EBITDA of CAD-0.7m compared to our expectation of CAD-2.2m. The deviation from our forecast is mainly explained by lower than expected royalties and G&A. The net loss was CAD3.3m versus our forecast of CAD-4.4m. Quarterly production came in at 605 barrels per day, of which oil accounted for 376, compared to our estimates of 633 and 370, respectively.

• The report contained no significant news on future activity in Quebec. The CEO commented that he was “confident that 2011 will be the year we make a breakthrough on the rerequisites for commercial development”. This includes additional technical data from the upcoming horizontal wells, new hydrocarbon legislation in Quebec, and improved availability of local service equipment and crews. Of these items, it is the two horizontal well tests scheduled to start in May/June (operated by Talisman) that will be the most important catalysts for 2011, in our view. In addition, the report by the government advisory agency BAPE (expected to be published in March) will be crucial, as it should provide input for the new hydrocarbon legislation.

• We reiterate our BUY recommendation on the back of this report. The shares are trading
at 0.3x our NAV estimate, implying less than 15% probability of commercialisation of the Utica shale gas discovery in our view. Based on the data points seen so far, we argue that this is too pessimistic, resulting in an attractive risk/reward. The key risk factors are political developments, commodity price volatility, and operational delays.

Analyst: Espen Hennie
+47 22482377
espen.hennie@dnbnor.no