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Pengrowth Energy Corporation Message Board

  • micronkelly micronkelly Jan 29, 2013 2:57 PM Flag

    PGH the good, bad, and ugly

    Bulls Say
    Horizontal drilling techniques provide the potential for
    increased production levels in Pengrowth's mature light
    oil plays.
    Pengrowth holds a large and diversified portfolio of assets
    that are equally weighted for oil or natural gas production.
    Pengrowth will leverage existing infrastructure at the
    Lindbergh heavy oil project, which will allow the firm to
    save on construction costs compared with a greenfield

    Bears Say
    Historically, Pengrowth increased production through
    acquisitions. Management has not yet proved its ability to
    materially increase volumes through the drill bit.
    Tertiary recovery in the Swan Hills region could effectively
    raise reservoir recovery and production levels, but the lack
    of an affordable source of CO2 negates the company's
    prospects at this time.
    Pengrowth's plans for further development in the
    Montney and Horn River have been shelved because of
    low natural gas prices.

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    • Financial Health:Pengrowth has benefited from higher oil
      prices, which at its current pace of development will allow
      the company to build up cash on its balance sheet. The
      company retains a CAD 1.25 billion revolving credit facility,
      which was 60% undrawn as of the first quarter of 2012. The
      company's nearest maturity dates for long-term debt are in
      2013 and 2015, as construction spending at Lindbergh will be
      ramping up. Based on our current estimates for commodity
      prices, production growth and capital spending, we would
      expect Pengrowth to be in violation of financial covenants
      (specifically its total debt to total capitalization covenant of
      50%) by 2013, before additional external financing. We
      expect the firm will issue additional equity, which we
      estimate will need to be about CAD 300 million-CAD 350
      million per year in each year of our forecast in order to
      maintain its dividend payments and avoid breaching debt
      covenants. More preferably, the firm could sell assets to pay
      down debt levels, or cut its dividend.

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