PBN - Petrobakken

[Aberhound]

I hold and I agree that it will be difficult to keep the dividend at this rate so there is the risk of a price dip if the dividend is cut. They are also vulnerable to increasing interest rates. They are running out of room on their bank line which management says will be increased. We shall see.

 

But over time the facilities get better and the techniques improves which means they can afford to pay more than their competitors for land. This builds moat. Last year the discount on WTI hurt results but this year the differential is almost gone and the Canadian dollar has weakened.

 

I don't think the economics of the high initial decline plays are well understood by investors. For every well drilled there is a long tail end. These long tail ends add up so that over time a production base with a low decline rate is formed. Facilities improve and cash flow turns positive. This means that banks can be confident that they will be repaid. If the company has difficulties paying bills they reduce drilling. There is little risk to the bank. While interest rates remain low it makes sense to borrow heavily so you build the production base more cheaply. Essentially the business is to buy undeveloped land cheaply, develop it with superior drilling techniques and turn it into valuable developed land.

 

What I find interesting is that the accounting does not take into account technical improvements and abiotic oil. Bakken only yields 5% of the oil in place which is increased to 15% with their gas injection EOR. They hope to increase it to 25%. Clearly the land value rises substantially if you can increase the oil you recover 5 fold. But what if the fields are being replenished from below and there are many more layers of oil at depth? I wonder if these wells will ever stop producing. If so then why is there a substantial depletion expense?

[alertmeipp]

No dividend cut, at least for now.

 

Lightstream Confirms October Dividend

 

5 hours ago - ACQUIREMEDIA

CALGARY, ALBERTA--(Marketwired - Oct. 15, 2013) - Lightstream Resources Ltd. ("Lightstream") (TSX:LTS) is pleased to announce that our dividend for the month of October will be paid on November 15, 2013 to all Lightstream shareholders of record on October 31, 2013. The October dividend will be $0.08 per Lightstream share. The ex-dividend date is October 29, 2013.

Lightstream is pleased to provide two convenient, cost-effective methods for shareholders to increase their investment in Lightstream. The Share Dividend Plan ("SDP") is available to most shareholders, enabling shareholders to receive dividends in the form of common shares at a 5% discount to the average market price. While similar to our Dividend Reinvestment Plan ("DRIP"), the SDP has certain tax attributes which may be more attractive to some shareholders. The DRIP remains available to Canadian shareholders, enabling such shareholders to reinvest their monthly cash dividend to acquire additional common shares at a 5% discount to the average market price. For further information regarding our SDP and DRIP, please visit Lightstream's website at www.lightstreamresources.com or contact Olympia Trust Company at 403-668-8887, toll free at 1-800-727-4493 or via email at corporateactions@olympiatrust.com.

Lightstream Resources Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. Lightstream is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

[Myth465]

Is everyone doing the DRIP.

I probably need to sit down and register for it.

[alertmeipp]

I am taking advantage of DRIP.

 

If you are in this for capital appreciate not dividend, why not?

[Aberhound]

Yes. DRIP allows you to dilute non-participants with a 5% discount and no trading cost. Long term local shareholders are rewarded and cash is freed up to maintain capex. Gradually more shareholders will be Canadian. Foreign fund managers probably hate the program as shareholders should be treated equally.

[Myth465]

Didnt they also arrange a US or Foreign program as well? STIP or something like that.

[alertmeipp]

Apparently, not all brokers support DRIP (for free).

[txitxo]

Petrobank, the parent company, is a net-net now.

[Aberhound]

Stock up 10% on Q3 results. The market seems to have great difficulty evaluating this company. I have been trying to understand the Depletion, Depreciation & Amortization expense. I checked to see if Kevin4u2's prediction from 2011 is coming true:

 

"Moreover the company may have to realize some accelerated depreciation shortly due to poor performance.  You see under canadian GAAP the DD&A was calculated using proven reserves and under IFRS depreciation is calculated using the more estimate driven Proven plus probable (2P) reserves.  Their drilling result have been poor and if they have to write down reserves it will flow through the income statement as accelerated DD&A.  I would say it's only a matter of time given the proven reserves cost closer to $50/boe and the are using the often management inflated 2P numbers.  "

 

However it turned out that the D, D & A expense for Q3 2010 was roughly the same as now. I remain confused. Kevin4u2 is certainly right stating the calculation is more estimate driven. I wonder what reserve additions are included (which would decrease the DD&A per barrel).

 

Cardium is finally cash flow positive. I wonder why management paid $1B for these assets? Yes it includes years of drilling locations but with a high discount rate I would apply to oil production and only 2 drills operating in the Cardium returns far in the future are worth little. I see that PBN has substantially better production per well than their predecessor. This should mean the value has increased (from a value less than they paid but now more than the 2010 value). Now I understand why others were suggesting the asset sales. I now agree. Cardium is a good play but somebody with more cash could develop the play more quickly so it should be worth more to others than PBN. It would be interesting to see what someone else would now be willing to pay. Management appears to believe it is still worth the $1B or there would have been an impairment charge to goodwill. (I assume there has been none or little since goodwill is still over $1.3 B). The market does not agree with management.

[Aberhound]

DRIP terminated effective January with dividend cut in half to $0.04 cents. Cap ex cut significantly and asset sales sought. Increased focus on Cardium. Management doing what the hedge funds and bankers request and they admit some capital spending in 2013 didn't produce the oil they expected.

 

http://finance.yahoo.com/news/lightstream-announces-2014-capital-plan-113000024.html