In a Dec. 17 research note, analyst Dave Popowich reported that Painted Pony Energy Ltd. (PONY:TSX) released production and spending guidance for 2019, both of which were "as expected" in that they reflect "the challenged Canadian gas market."
Factors at play, Popowich noted, include lower AECO strip pricing of natural gas and continuing pipeline constraints. "There is clearly little incentive (to say nothing of ability) for natural gas producers to increase output in this commodity tape," he noted.
Popowich relayed that the company forecasts average production next year to be 54–56,000 barrels of oil equivalent per day, which represents a 3–4% reduction from that of 2018. Capital spending is projected to fall within the CA$95–110 million range. "The budget is expected to match cash flow, and we believe Painted Pony will manage spending up or down as natural gas prices permit," he wrote.
In light of the current environment and Painted Pony's guidance numbers, CIBC revised its model on the company, Popowich pointed out. It lowered its 2019 capital spending estimate by 23%, to $110.5 million, and its 2019 production projection by 9%, to 54,569 barrels of oil equivalent per day.
Also, CIBC reduced its price target to CA$2.75 per share from CA$3.25 and maintained its Neutral rating on the oil and gas company, which is currently trading at around CA$1.33 per share. "We need to see appreciable improvements in the Western Canadian gas market before we are prepared to get constructive on the name," Popowich indicated.
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Disclosures from CIBC, Painted Pony Energy Ltd., December 17, 2018
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Important Disclosure Footnotes for Painted Pony Energy Ltd. (SSRM)
· CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Painted Pony Energy Ltd. in the next 3 months.
