CALGARY, June 16 /CNW/ - Canada's publicly traded oil and gas companies
and trusts are back in the game with investors, a report released Monday
An investor who put $100 into each of Western Canada's 92 public junior
and intermediate oil and gas companies at the beginning of 2008 would have
turned their $9,200 into $13,627 before commissions by the end of May. All but
eight of the intermediate and junior producers included in the report
experienced an increase in their share or unit prices in the first five months
of the year. The average intermediate producer experienced a total return
between January and May of 2008 of 46 percent while the average junior
returned 49 percent.
These are just a few of the findings in the latest iQ Report by Bryan
Mills Iradesso, an investor relations firm with offices in Calgary and
Toronto. Bryan Mills Iradesso tracks the performance of junior and
intermediate energy trusts and oil and gas companies that operate primarily in
Western Canada and trade on the TSX and TSX Venture Exchange. The comparison,
released quarterly and made available free to investors, 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 comparison includes the results
of 65 juniors and 27 intermediates for the first quarter of 2008.
Peter Knapp, president of Bryan Mills Iradesso, says while most oil and
gas players struck out in the stock market in 2007, almost all players are
back in the game in dramatic fashion so far in 2008.
"The Canadian energy sector saw its fair share of adversity in 2007. This
adversity weeded out some weaker players and set up others to come out even
stronger. Now companies with reputable management teams and quality assets are
enjoying renewed access to capital, a key component that drives growth in this
sector," says Knapp. "When a company gets a capital advantage, growth options
open up for acquisitions and expanding drilling programs. In this sector,
success can beget success."
The iQ Report offers several parameters for evaluating the industry to
guide investors in their search for companies or trusts that deserve further
Other highlights of the latest iQ Report include the following:
- The number of trusts is shrinking. Only 15 of the intermediates and
three of the juniors included in the iQ Report are structured as
trusts. This compares with a total of 27 trusts in the first quarter
of 2007. Meanwhile, junior corporations are moving into the
intermediate ranks to fill the gap vacated by the trusts.
- Of the 65 junior Canadian oil and gas companies, 45 percent earned
money in the first quarter of 2008 while the remaining 55 percent
experienced a loss for the period. At the same time, 63 percent of
the intermediates reported positive earnings. In a period of record
high oil prices, these numbers emphasize two things. First, oil and
gas is an expensive business in Canada. Second, Canada's oil and gas
sector is more weighted to natural gas prices than oil.
- The median junior oil and gas company's production by volume is
weighted 71 percent to natural gas versus oil and liquids. As such,
this group is benefiting immensely from a run up in natural gas
prices from around $7/Mcf at the beginning of the year to around
$12/Mcf in June.
- After miserable stock market returns in 2007, the median total return
for the juniors increased 20 percent during the first quarter and
49 percent when you include April and May. Most of these companies'
shares are still well below the highs they reached in 2006 in terms
of share prices or multiples of cash flow. In terms of the
intermediates, the median total return in the first quarter increased
21 percent while returning 46 percent over the first five months. The
total return is a combination of the share price return plus the cash
distributions paid by trusts during the period.
- Intermediate companies and trusts enjoy a capital markets advantage
in that they trade at a median enterprise value to cash flow multiple
of 7.1 times. Enterprise value takes into account both equity and
debt capitalization. The same number for the median junior is only
5.7 times. This makes a significant difference when it comes time to
access equity capital for growth.
- Operating expenses followed commodity prices upward in the first
quarter of 2008, increasing to $11.12/boe for the juniors and
$10.29/boe for the intermediates.
While the strength in the stock market is well known, this quarterly iQ
Report suggests there is plenty of additional upside.
"The stock market has rallied, but so have corporate results," says
Knapp. "It's game on again and we still have a long way to go to get back to
the bull market multiples for this sector that we had in late 2005 and early
Bryan Mills Iradesso's complete iQ Report is available free to media
representatives and investors who fill out an online form on the following
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, email@example.com, http://iq.bmir.com