merchant sieht faire derzeitige Bewertung bei 33 cent mit Potenzial nach oben.
We estimate production will be 814 boe/d in the first quarter of 2012. Cash flow per boe will increase as Edge’s oil weighting grows from 42% in Q1 2012 to 79% by Q1 2014. We believe Edge represents excellent value based on our DCF valuation and the company’s EV to expected EBITDA multiple of 2.8x (for the year ending 31 March 2014).
Edge Resources (EDE.TSX-V)
Onshore Canadian Oil
Edge Resources recently acquired an attractive heavy oil asset that provides immediate production, scope for material low-risk growth and additional exploration upside. A subsequent equity raise of $CAD 4.5M with a globally recognised institutional investor provides the company with the capital it needs to develop its newly acquired assets.
? Target Price: We are updating our target price for Edge Resources to $CAD 0.33/share, based on the discounted value of the company’s currently producing assets.
? McLaren Pool, Primate, Saskatchewan, Canada: On 1 February 2012, Edge announced it acquired a 100% working interest in 19 sections in the Primate area of West Saskatchewan, Canada for $CAD 8.8M. At the time of the acquisition, the acquired assets were producing 350 boe/d with a 65% oil weighting. Substantially all the oil production is coming from a single pool in the McLaren sands contained within two sections. The excellent quality of this heavy oil pool has meant that it has been developed without any pressure support (waterflooding), which is unusual for a shallow (750m) heavy oil field. We believe Edge will be able to grow production by i) providing pressure support and ii) by developing the southern portion of the pool which has been totally undeveloped.
? Upside, Primate, Saskatchewan, Canada: We note that Twin Butte Energy Corp (TBE.TSX-V, $CAD 480M), a growing junior oil company, is drilling very actively in lands that are immediately adjacent to several sections held by Edge. We also note that Twin Butte states that within its asset portfolio its Primate lands are providing some of the highest initial production rates. Twin Butte is developing a shallow channel sand system, the Waseca sands, which are very comparable to the McLaren sands. Therefore, we believe that Edge will look to explore in these sections for oil pools that could be comparable in scale to its existing McLaren pool. Given the amount of exploration activity occurring in the Primate area, we believe that more than half of Edge’s 17 undeveloped sections are prospective for
30 March 2012
Recommendation
BUY
0 March 2012
Valuation
suggesting there is upside to our valuation. Based on our assumptions Edge’s total oil production would peak at circa 970 b/d in the first quarter of 2014. At that time we expect Edge’s gas production to be circa 250 boe/d and of limited materiality from a valuation perspective (in the absence of a strong upward correction in natural gas prices).
? Conclusion: Edge has the ingredients of a successful high growth junior oil & gas company: i) good management ii) good assets and iii) capital. Edge has made an excellent heavy oil acquisition that will allow the company to grow production through low risk field developments (drilling new development wells, workovers and waterflooding). Additional upside is likely as Edge explores on the 17 sections it recently acquired in a highly prospective area. Future growth compliments current production which is generating immediate cash flow. We estimate production will be 814 boe/d in the first quarter of 2012. Cash flow per boe will increase as Edge’s oil weighting grows from 42% in Q1 2012 to 79% by Q1 2014. We believe Edge represents excellent value based on our DCF valuation and the company’s EV to expected EBITDA multiple of 2.8x (for the year ending 31 March 2014).
- Valuation and Financial Summary on following pages -
