Petrel Energy Ltd. Spain Prospective Resource Estimate Confirmatory; Raise Target to AUD 0.27

Transcription

1 Exploration and Production Equity Research November 12, 2013 Spain Prospective Resource Estimate Confirmatory; Raise Target to AUD 0.27 Last evening, Petrel unveiled independently certified prospective resource estimates for the Tesorillo project in Southern Spain of up to 3TCF gross (P10) to the licensees (Petrel has 21.25% through its 25% holding in Schuepbach, with the option to go to 43.35% by year-end, for $5.5 million). Petrel notes in the release that these estimates are calculated using probabilistic methods, are based on arithmetic summation of volumes, and do NOT take into account geologic risk. However, the 1956 drilling on the license did establish the presence of gas and serves in part as a basis for this and the company's assessment, it appears, and modern drilling techniques will be used in The P50 case (most likely, per the estimate) is 1.2TCF gross to the group. These were certified by an engineer from Netherland Sewell. Assigning the P90 (430 BCF) case to Petrel, establishing a Probability of Success at 25%, a $1/MCF net value yields $25.5 million in value for their share of the project, or $0.05 per share, versus our original estimate of $0.01/share. With LNG prices of over $10 in Spain, proximity to pipeline, and recently-relaxed drilling/completion rules in Spain, we view the market as highly receptive to a discovery. At the same probability of success, but assuming the 3TCF case, we would arrive at a $160 million value, or $0.38 per share. We remind investors that the likelihood, even in our estimate, is 0 (25% success implies 75% chance of failure)--drilling still needs to determine the presence of trap, seal, appropriate rock and, of course, gas). Given Uruguay drilling has yielded the presence of oil (though it is still early days), we've increased our assessment of success to 1.5%, from 1%. Again, there's still 98.5% chance of failure in our guess, but this yields a $0.14 value for Uruguay. We've assigned a value of 0 for the Barnett (down from a penny) and maintain our $0.06 value for the Cardium acreage. Petrel, in our view, is a collection of real options, on three continents, to "make" a company. Since we initiated coverage 3 months ago, the company has established the presence of oil in Uruguay, produced oil in Canada, and now been confirmed as potentially having a share in up to 3TCF of gas in Spain. Summing up our new valuation for Uruguay (now $0.14) and Spain (now $0.05) with our $0.06 value for the Cardium, and subtracting the penny we carried for Texas, we arrrive at a new value of $0.25 in US Dollars, or AUD 0.27 per share. Rating Outperform Market-perform Underperform Petrel Energy Ltd Symbol Price Price Target PRL AU AUD0.15 AUD0.19 One year price history for PRL AU Volume (mil.) Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Market Data 52-wk Range AUD AUD0.19 Avg Daily Vol 963,195 Market Cap (M) AUD61 Free Float 75% Jul-13 Aug-13 Sep-13 Price (AUD) 0.20 Oct-13 Nov Contacts Clarkson Capital Markets 597 Fifth Avenue, 8th Floor New York, NY 10017, USA Tel: +(1) trade@clarksons.com Analyst: Brian W Foote, CFA brian.foote@clarksons.com Disclaimer This Investment Research is prepared by and/or disseminated by Clarkson Capital Markets ("CCM"). CCM is the trading name of Clarkson Capital Markets LLC a member of FINRA and SIPC and/or Clarkson Investment Services Limited authorized and regulated by the Financial Conduct Authority. Clarkson Capital Markets LLC ("CCM" or "the Firm") does and seeks to do business with companies covered in its research reports. As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. PLEASE READ THE IMPORTANT DISCLOSURES AND ANALYST CERTIFICATION INFORMATION AT THE END OF THIS REPORT. 1/5

2 PETREL VALUATION URUGUAY USGS volume assessment % on petrel acreage Volume npv/bbl or MCF Probability of Success TOTAL MM USD PER SHARE OIL (mm bbl) % 254 $ % 57.2 NGL (mm bbl) % $ % 16.8 GAS(BCF) % 5500 $ % % SPAIN NS Assessment (low case, P90) Petrel Share Volume GAS(BCF) % $ % Barnett Shale 000 acres $1000/acre CANADA/CARDIUM sections wells/section locations NPV/location cash TOTAL USD 0.25 source: Company Filings, CCM Estimates AUD (at 0.93) /5

3 Analyst Certification Disclosures The analyst producing this Investment Research hereby certifies that the views expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers referred to in this document and the analyst acknowledges that the recommendation is fairly presented. The analysis and recommendations contained herein are the opinion of the research analyst writing the report (or the research department) and may not be reflective of the opinion of the CCM or any of its associated non-research personnel. Conflicts of Interest CCM has a conflicts of interest policy to ensure that all recipients of the investment research are treated fairly and not discriminated against. To this effect no part of the analyst s compensation was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in this report. The research analysts, strategists, or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues but not specific to any investment banking revenues. Analyst's performance related pay is based on both the accuracy and quality of their recommendations and on the Firm s trading revenue in the sector covered by the analyst. Analysts are not permitted to accept gifts from issuers, connected persons or other persons who have a material interest in the issuer for whom they conduct research and analysts are required to declare all outside interests. The costs and expenses of Investment Research, including the compensation of the analyst(s) that prepared this report, are paid out of the firm's total revenues, a portion of which is generated through investment banking activities. The research personnel may conduct site visits from time to time but are prohibited from accepting payment or reimbursement by the subject company for any costs or visits. Clarkson may seek investment banking or other business from the companies referred to in this research. This report and any recommendation contained herein speak only as of the date of this report and are subject to change without notice. Clarkson Capital Markets ("CCM") and its affiliated companies and employees shall have no obligation to update or amend any information or opinion contained in this report, and the frequency of subsequent reports, if any, remain in the discretion of the author and CCM. Stock Rating CCM analysts use a relative rating system in which they rate stocks as 1-Outperform, 2- Marketperform, 3-Underperform (see definitions below). Investors should carefully read the entire research report, including the definitions of all ratings, and not infer its contents from ratings alone. 1-Outperform The stock s total return (price appreciation plus dividend yield) is expected to exceed more than 20% over the next 12-month investment horizon. 2-Marketperform The stock s total return is expected to perform within a range of +19% to (-19%) over the next 12-month investment horizon. 3-Underperform The stock s total return is expected to decline more than 20% over the next 12- month investment horizon. This report may contain forward-looking statements, which involve risks and uncertainties. CCM has not independently verified the facts, assumptions and estimates contained in this report. Clarkson Capital Markets Ratings Distribution as of Ratings Distribution Percent Outperform % Market Perform % Under Perform % Total % Other Important Disclosures Valuations Methods the firm s research professionals include certain assumptions and valuation methods for the determination of price targets for any given security. The research report contains information on these assumptions and valuation methods. For additional discussion please contact the research analyst directly or Peter J. Greca Chief Compliance Officer at Peter.Greca@Clarksons.com. CCM uses three ratings Outperform, Market Perform and Underperform reflecting expected price performance relative to each analyst s coverage universe, on an un-weighted basis with regard to market capitalization and with a 12-month time horizon. FINRA rules require a member to disclose the percentage of its rated securities to which the member would assign a buy, hold, or sell rating if such a system were used. General disclosures in addition to specific disclosures required by certain jurisdictions Our research is disseminated primarily electronically and, in some cases, in printed form. Electronic research is simultaneously available to all clients. Individual consultations with our analysts may not be disseminated electronically by the firm. All material presented in this report, unless specifically indicated otherwise, is under copyright to Clarkson. No part of this material may be (i) copied, photocopied or duplicated in form by any means or (ii) redistributed without prior written consent of Clarkson. CCM s ultimate parent is Clarkson PLC (London Stock Exchange; ticker CKN:L), a Public Limited Company registered in England and Wales and domiciled in the UK. Clarkson PLC was founded in 1852 and is the world s leading integrated shipping services group, operating from 29 offices located in 17 countries on five continents. As a result of its pre-eminent position within the shipping industry, the group has an established course of dealing, stretching in some cases over many decades, with key participants in the industry. Clarkson PLC is principally an investment holding company, whose subsidiaries are primarily involved in providing shipping related services. As a result, although Clarkson PLC, or its affiliated entities, may have concluded transactions for products or services other than investment banking services from the subject company in the past 12 months, no employee of Clarkson PLC, or its affiliates, has the ability to influence the substance of the research reports prepared by the research analysts of CCM. IMPORTANT DISCLOSURES ON SUBJECT COMPANIES As of the end of the last calendar quarter, Clarkson is not a beneficial owner of more than 1% of any class of equity for any company covered in this report. In the next [12] months, Clarkson expects to receive or does intend to seek compensation for investment banking services from entities mentioned in this report. In the past [12] months, Clarkson may have received compensation for products and services other than investment banking services from entities mentioned in this report. Within the last 12 months, Clarkson has either provided or currently is providing non-investment banking, securities related services to and/or 3/5

4 in the past has entered into an agreement to provide services or currently has a client related relationship with the companies covered in this report. Analyst as Officer or Director: Clarkson has internal policies that prohibit its analysts, persons reporting to analysts or members of their households from serving as an officer, director, advisory board member or employee of any company in the analyst s area of coverage. GENERAL This report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject CCM and affiliates to any registration or licensing requirement within such jurisdictions. All material presented in this report, unless specifically indicated otherwise, is under copyright to Clarkson. Investment Research DISCLAIMER This report (the "Report") is investment research which has been prepared on an independent basis by: (i) Clarkson Capital Markets LLC d/b/a Clarkson Capital Markets, a member of FINRA and SIPC, with offices at 597 Fifth Avenue, 8th/Fl, New York USA, and 1333 West Loop South, Suite 1550, TX 77027; and/or (ii) Clarkson Investment Services Limited a company registered in England and Wales with company number having its registered office is CISL, St Magnus House, 3 Lower Thames Street, London EC3R 6HE, United Kingdom and authorised and regulated by the Financial Conduct Authority ("CISL"); (together, "Clarkson Capital Markets", "CCM", "we", "our"; each a "member of CCM") and made available to you by Clarkson Capital Markets LLC, and/or CISL (as the case may be). The Report is confidential and is solely for the use of those to whom a member of CCM directly distributes it. Neither the whole nor any part of it may be: (i) reproduced to third parties; (ii) disclosed to, or used or relied upon by, any other person or used for any other purpose. Neither the information contained in the Report or on which such Report is based (together, the "Information") nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The Information is based on various sources which we believe to be reliable. However, such Information has not been independently verified by CCM and accordingly, neither CCM nor any of its connected persons make any representation or warranty, express or implied, with respect to: (I) the accuracy or completeness of the Information; (II) that the Information remains unchanged after the issue of this Report (including, without limitation, that the research on the subject company is withdrawn. No reliance may be placed for any purpose whatsoever on the Information, representations, estimates or opinions contained in this Report, and no liability is accepted for any such Information, representation, estimate or opinions. Any projections, opinions, forecasts or estimates in this Report are those of the author only; they reflect only current views of the author and are subject to change without notice. Salespeople, traders of CCM and/or its connected persons, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this Report. The investments discussed in this Report (together, the "Investments"; each an "Investment") may not be suitable for all investors and does not take into account the recipients' suitability requirements or investment risk appetite. You should make your own investment decisions based upon your own financial objectives and financial resources and it should be noted that investment involves risk. You should consider this Report as only a single factor in making their investment decision. Any decision to purchase any Investment must take into account existing public information on the relevant Investment or any registered prospectus. Please note that past performance is not necessarily a guide to future performance and an investor may not get back the amount originally invested. Where investment is made in currencies other than the currency of the Investments, movements in exchange rates will have an effect on the value, either favorable or unfavorable. In the event of any doubt about any investment, you should contact your own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Any loss or other consequence arising from the use of this Report shall be your sole and exclusive responsibility and neither CCM nor its connected person accepts liability for any such loss or consequence. In the event that this Report is sent to you by a party other than CCM, please note that the contents may have been altered from the original, or comments may have been added, which may not be the opinions of CCM. In such case neither CCM nor its connected person is not responsible for this amended Report. We have guidelines and rules in line with the respective regulatory body of each member of CCM ensuring that such member s business areas operate independently of each other so that the clients' interests are satisfactorily safeguarded. Each member of CCM will especially place emphasis on there being satisfactory information barriers between the departments where conflicts may arise. Share Ownership Policy: Connected persons are allowed to own shares/ derivative positions in the companies CCM produces investment research on. CCM ensures that such dealings are conducted in strict compliance with its internal staff dealing procedure, and accordingly is satisfied that the objectivity of the investment research is not compromised. CCM and/or its connected persons, may have a long or a short position in any securities of the issuer or in related investments. You should be aware that the author of this Report or individual who assisted in the production of this Report (or a member of his/her household) may have a direct ownership position or a derivative position in securities issued by a company covered herein. You are advised that CCM and/or any connected person already acted upon the recommendations contained herein or made use of all information on which they are based. CCM is or may be providing, or has or may have provided within the previous 12 months, significant advice or investment services in relation to some of the Investments or related investments. For the Investments in which any member of CCM is not a market maker, such member may provide bids and offers and may act as principal in a riskless principal capacity in connection with such transactions. A member of CCM may act as agent in traded financial instruments linked to Investment that may have been recommended in this report; it may, at any time, hold a trading position (long or short) in the shares of the companies discussed in this report and may engage in Investments in a manner inconsistent with this Report and, with respect to Investment, may buy or sell from customers on a riskless principal or agency basis. A member of CCM may seek investment banking or other business from the companies referred to in this Report. The research analysts, strategists, or research associates and research personnel principally responsible for the preparation of this Report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues but not specific to any investment banking revenues. The research personnel may conduct site visits from time to time but are prohibited from accepting payment or reimbursement by the subject company for any costs or visits. A member of the CCM and any connected person may: (i) do business that relates to companies covered herein, including specialized trading and riskless principal or principal trading, and investment services: (ii) sell to and buy from customers the equity securities of companies covered herein on a riskless principal basis. All intellectual property rights in the Report belong to CCM. In this disclaimer, "connected person" means, in relation to a member of CCM its shareholders directors, officers, employees and agents, its holding company, the shareholders, subsidiaries and subsidiary undertakings of 4/5

5 its holding company and the respective directors, officers, employees and agents of each of them. This disclaimer is governed under English law and any dispute under or in connection with it shall be subject to the exclusive jurisdiction of English Courts. United Kingdom and MiFID passport jurisdictions: Distribution of this material in the UK is governed by the FCA Rules. This Report is intended only for distribution to Professional Clients and Eligible Counterparties (as defined under the rules of the FCA) and is not directed at Retail Clients (as defined under the rules of the FCA). Investment research produced by a third party and distributed to recipients in the MiFID passport jurisdictions has been identified as investment research produced by that third party and has been approved by CISL. United States of America: Distribution of this Material in the United States or to US persons is intended to be solely for major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of All US persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any US recipient of this Material wanting additional information or to effect any transaction in any security of financial instrument mentioned herein, must do so by contacting a registered representative of Clarkson Capital Markets, a FINRA registered broker dealer at or Investing in non-u.s. securities: Investing in non-u.s. securities may entail certain risks. The securities of non-u.s. issuers may not be registered with, nor be subject to the reporting requirements of the U.S. Securities and Exchange Commission. There may be limited information available on foreign securities. Offshore companies are generally not subject to uniform audit and reporting standards, practices and requirements comparable to those in the U.S. Securities of some foreign companies may be less liquid and their prices more volatile than securities of comparable US entities. In addition, exchange rate movements may have an adverse effect on the value of an investment in a foreign security and its corresponding dividend payment for U.S. investors. Net dividends to ADRs, if applicable are estimated, using withholding tax rates conventions, deemed accurate, but investors are urged to consult their tax advisor for exact dividend computations. Investors who have received this report from a member of Clarkson may be prohibited in certain states or other jurisdictions from purchasing securities mentioned in this report from a member of Clarkson. This Report may discuss numerous securities, some of which may not be qualified for sale in certain states and may therefore not be offered to investors in such states. This document should not be construed as providing investment services. Investing in non-u.s. securities including ADRs involves significant risks such as fluctuation of exchange rates that may have adverse effects on the value or price of income derived from the security. Securities of some foreign companies may be less liquid and prices more volatile than securities of U.S. companies. Securities of non-u.s. issuers may not be registered with or subject to Securities and Exchange Commission reporting requirements; therefore, information regarding such issuers may be limited. 5/5