M&A activity decimates size - but not strength - of oil and gas sector
TSX - Toronto Stock Exchange
Dec. 14, 2009 (Canada NewsWire Group) --
CALGARY, Dec. 14 /CNW/ -- Mergers and acquisitions and a challenging operating environment have led to a dramatic decrease in the number of public junior and intermediate oil and natural gas companies operating in Western Canada, a survey released Monday shows.
The number of conventional junior and intermediate oil and gas players has fallen 36 percent over the past four years to 77 in the third quarter of 2009. This compares with 121 in the third quarter of 2005, 111 in 2006 and 99 in 2007.
This is just one of the findings in the latest iQ Report by Bryan Mills Iradesso, a national communications and research firm. The quarterly iQ Report tracks the performance of all junior and intermediate oil and gas companies and trusts that operate primarily in Western Canada and trade on the TSX and TSX Venture Exchange. The comparison, available free to investors at http://iq.bmir.com, defines juniors as companies that produce between 500 and 10,000 barrels of oil equivalent per day (boe/d) and intermediates as companies that produce between 10,000 and 100,000 boe/d. Bryan Mills Iradesso's latest report compares the results of 54 juniors and 23 intermediates for the third quarter of 2009. Select information is also provided on oil sands players, international operators and emerging producers.
Peter Knapp, editor of the iQ Report and president of Bryan Mills Iradesso, said the junior and intermediate oil and gas sector is shrinking rapidly as companies continue to exit the industry through mergers and acquisitions while new entrants have been few and far between because of the challenging economic environment.
"The junior and intermediate companies that are continuing into 2010 may be fewer in number, but they are durable and dynamic," said Knapp. "What doesn't kill you can make you stronger."
Knapp said the quality of the remaining players is rising thanks to strong crude oil prices, improving natural gas prices and a round of recent equity financings that put balance sheets on firmer ground.
In addition to tracking the number of oil and natural gas producers, the latest iQ Report reveals the following about the recent performance of the junior and intermediate energy sector:
The intermediate grouping showed median cash flow netbacks of $20.31 per barrel of oil equivalent (boe) for the third quarter of 2009. This is almost double the median junior cash flow netback of $10.29 per boe. This is indicative of a higher crude oil weighting for the intermediates, stronger hedging programs and lower costs on a per boe basis due to economies of scale. The higher cash flow netbacks also translate into lower debt to cash flow ratios and lower share price to cash flow ratios. One method of valuing oil and gas companies is a comparison of enterprise value (the sum of market capitalization plus net debt) versus average production rates. This number varies greatly from $14,000 to $645,000 per flowing boe/d for juniors, and from $29,000 to $153,000 for intermediates. The markets are expecting great things from the companies with higher valuations, while expectations are low for companies at the bottom. Nine junior companies in the iQ Report had negative or negligible cash flow. All of these companies had less than 1,500 boe/d of production for the quarter, showing that the smallest companies got hit hardest by low commodity prices this year. Only four of 54 junior oil and gas companies and only 10 of 23 intermediate companies reported positive earnings in the third quarter of 2009. The median junior lost $2.2 million during the third quarter while the median intermediate lost $1.8 million. Perhaps a leading indicator of the sector's profit potential, most investors in the sector would have been pleased with the performance of their portfolio in the third quarter of 2009. The median total return including dividends and distributions for both the juniors and intermediates was positive during the quarter and the subsequent two months of October and November. In fact, from July 1 to November 30, 2009 a median return of 22 percent was achieved for the intermediates and 34 percent for the juniors.
The following list shows the production levels of all the junior and intermediate companies that met the criteria for inclusion in the Q3 iQ Report. Companies excluded from the list include those whose primary business was not oil and gas exploration, development and production and those whose production was not primarily from Western Canada.
JUNIOR OIL AND NATURAL GAS COMPANIES PRODUCTION IN THE THIRD QUARTER OF 2009 Company Stock Oil & Natural Average symbol liquids gas daily (T equals TSX, production production production V equals Venture) (bbls/d) (mmcf/d) (boe/d) Anderson Energy Ltd. AXL-T 1,013 36.282 7,060 Angle Energy Inc. NGL-T 3,100 26.710 7,552 Arcan Resources Ltd. ARN-V 913 2.166 1,274 Argosy Energy Inc. GSY-T 104 4.316 823 Arsenal Energy Inc. AEI-T 1,526 3.327 2,081 Bellamont Exploration Ltd. BMX.A-V 194 3.768 822 Bellatrix Exploration Ltd. BXE-T 2,253 31.075 7,432 Berens Energy Ltd. BEN-T 875 18.450 3,950 BlackPearl Resources Inc. PXX-T 4,247 5.065 5,091 Bonterra Oil & Gas Ltd. BNE-T 3,084 10.881 4,898 Canadian Phoenix Resources Corp. CXP-V 894 0.220 931 Canext Energy Ltd. CXZ-V 228 4.089 910 Cequence Energy Ltd. CQE-T 195 6.734 1,317 Cinch Energy Corp. CNH-T 207 13.044 2,381 Crocotta Energy Inc. CTA-T 1,000 10.005 2,668 Culane Energy Corp. CLN-V 872 2.136 1,229 Delphi Energy Corp. DEE-T 1,168 33.628 6,773 Diaz Resources Ltd. DZR-T 84 2.966 578 Enterra Energy Trust ENT.UN-T 5,411 26.977 9,907 FairWest Energy Corp. FEC-T 77 2.927 565 Fortress Energy Inc. FEI-T 13 6.741 1,137 Freehold Royalty Trust FRU.UN-T 4,441 15.315 6,994 Great Plains Exploration Inc. GPX-T 477 4.271 1,189 Insignia Energy Ltd. ISN-T 411 10.315 2,130 International Sovereign Energy Corp. ISR-T 84 4.577 847 Ironhorse Oil & Gas Inc. IOG-V 9 6.252 1,051 Legacy Oil & Gas Inc. LEG-T 1,801 0.280 1,847 Midnight Oil Exploration Ltd. MOX-T 635 7.064 1,812 Midway Energy Ltd. MEL-T 154 4.401 887 Monterey Exploration Ltd. MXL-T 436 9.918 2,089 NuLoch Resources Inc. NLR.A-V 242 1.968 570 One Exploration Inc. OE.A-V 177 2.036 517 Open Range Energy Corp. ONR-T 201 12.612 2,303 Orleans Energy Ltd. OEX-T 639 19.254 3,848 Painted Pony Petroleum Ltd. PPY.A-V 1,052 3.617 1,655 Petro-Reef Resources Ltd. PER-V 131 4.288 845 ProspEx Resources Ltd. PSX-T 493 8.906 1,978 Questerre Energy Corp. QEC-T 352 1.680 632 Redcliffe Exploration Inc. RXP.A-V 263 3.605 864 Rock Energy Inc. RE-T 1,763 8.775 3,225 Seaview Energy Inc. CVU.A-V 432 12.486 2,513 Second Wave Petroleum Ltd. SCS-V 553 2.624 990 Stonefire Energy Corp. SFE.A-V 360 5.325 1,247 Storm Exploration Inc. SEO-T 1,130 41.399 8,030 Sure Energy Inc. SHR-T 81 3.453 657 Terra Energy Corp. TT-T 1,309 28.845 6,117 Triton Energy Corp TEZ-V 39 4.658 816 Twin Butte Energy Ltd. TBE-T 849 12.269 2,894 Twoco Petroleums Ltd. TWO-V 0 6.068 1,011 Vero Energy Inc. VRO-T 1,302 31.850 6,610 West Energy Ltd. WTL-T 3,029 4.438 3,769 Wrangler West Energy Corp. WX-V 288 4.888 1,103 Yoho Resources Inc. YO-V 369 11.811 2,337 Zapata Energy Corporation ZCO-V 1,428 6.295 2,478 INTERMEDIATE OIL AND NATURAL GAS COMPANIES PRODUCTION IN THE THIRD QUARTER OF 2009 Company Stock liquids gas daily symbol production production production (T equals TSX) (bbls/d) (mmcf/d) (boe/d) Advantage Oil and Gas AAV-T 8,431 91.200 23,631 ARC Energy Trust AET.UN-T 30,638 193.117 62,824 Baytex Energy Trust BTE.UN-T 32,553 60.420 42,623 Birchcliff Energy Ltd. BIR-T 3,017 45.210 10,552 Bonavista Energy Trust BNP.UN-T 23,924 193.205 56,125 Celtic Exploration Ltd CLT-T 3,813 68.964 15,307 Compton Petroleum Corporation CMT-T 3,208 99.310 19,760 Crescent Point Energy Corp. CPG-T 40,854 32.806 46,322 Crew Energy Inc. CR-T 4,819 49.478 13,065 Daylight Resources Trust DAY.UN-T 6,794 100.250 23,502 Enerplus Resources Fund ERF.UN-T 36,130 323.884 90,111 Fairborne Energy Ltd. FEL-T 3,855 56.797 13,321 Galleon Energy Inc GO-T 5,714 57.012 15,216 Iteration Energy Ltd. ITX-T 4,523 64.176 15,219 NAL Oil & Gas Trust NAE.UN-T 11,801 69.700 23,418 NuVista Energy Ltd NVA-T 7,334 121.028 27,505 Paramount Energy Trust PMT.UN-T 0 152.400 25,400 Paramount Resources Ltd. POU-T 3,733 49.880 12,046 Pengrowth Energy Trust PGF.UN-T 39,394 232.444 78,135 Peyto Energy Trust PEY.UN-T 2,916 89.257 17,792 Progress Energy Resources PRQ-T 3,869 157.520 30,122 Trilogy Energy Trust TET.UN-T 3,740 91.759 19,033 Zargon Energy Trust ZAR.UN-T 5,382 28.234 10,088 Note: Barrels of oil equivalent are based on an energy equivalency of six thousand cubic feet of natural gas to one barrel of oil.
Bryan Mills Iradesso's complete iQ Report is available free to media and investors who fill out an online form on the following website: http://iq.bmir.com.