Company Overview

The company is headquartered in Alberta, Canada, and is mainly engaged in exploration and production of natural gas and crude oil.

The company's main assets are concentrated in three core regions of western Canada: liquid gas minerals in Alberta Foothills, natural gas minerals in Deep Basin Devonian, and light crude oil minerals in Peace River. The company currently owns 114,000 net acres of land, accounting for 97.1% of undeveloped land, and an average working equity of 98.5%. The company's current net present value of 1P and 2P reserve resources after tax calculated at 10% is $87.4 million and $119 million respectively.

The company owns 100% interest in the Alberta Foothills project, with 1P and 2P reserves of 12.0 Mboe and 17.6 Mboe respectively, producing 20 million cubic feet of natural gas and 184 barrels of condensate and natural gas condensate per day from January to September 2016. The company has 100% interest in the Deep Basion Devonian project and has identified 2 gas targets so far. The Peace River project's 1P and 2P reserves were 69,000 and 99,000 barrels of oil, respectively, and produced 126 barrels of oil per day from January to September 2016.

Status and prospects of the industry

In 2015, Canada's gas consumption was 97 billion cubic meters, with a compound annual growth rate of 5.4% over the past 5 years, and is expected to continue growing at a compound annual growth rate of 3.5% over the next 5 years. Due to the increase in US shale gas production, Alberta's gas exports to the US fell by an average of 16.9% per year between 2010 and 2015. The decline in demand in the US was partly offset by increased demand in the domestic market. The main use of Alberta natural gas in Canada is oil sands production and power generation, which is expected to grow by 5% and 3% each year.

Alberta is rich in natural gas resources and has extensive gas transportation pipelines and storage facilities.

Alberta has an attractive royal mineral tax system for natural gas production, with a rate of 5% to 36%. Alberta's gas mines have a long economic life (25 to 30 years).

Compared to Japanese LNG, Henry Hub, and European gas prices, Alberta's gas prices are lower.

The price of natural gas has been on the rise since August 2016 and is expected to gradually increase from 2017 to $3.47 per gigajoule by 2020.

Advantages and opportunities

The company owns a large amount of undeveloped land, and long-term reserves and production are guaranteed to a certain extent.

The company's project is close to third-party processing equipment and regional collection and transportation systems, including NGTL systems.

The company's management is experienced in the industry, covering operations, exploration, production, finance, etc.

Weaknesses and risks

The company was profitable only in 2014, and the rest of the year (including January-September 2016) lost money.

Companies require large capital investments to achieve growth strategies, and performance growth is constrained by capital.

The company's customers are highly concentrated, and loss of customers will cause huge fluctuations in performance.

valuations

The company's market capitalization is small, and there should be a certain discount on the valuation. The company's P/B is higher than that of comparable companies in the industry. We gave an IPO-only rating of “5.”