M&A activity decimates size - but not strength - of oil and gas sector

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.

SOURCE BRYAN MILLS IRADESSO

For further information: For further information: Peter D. Knapp, President, Bryan Mills Iradesso, 400, 805 10th Avenue SW, Calgary, Alberta, T2R 0B4, T: (403) 503-0144 x202, ircontact@bmir.com, http://iq.bmir.com

Organization Profile

BRYAN MILLS IRADESSO

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890