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Undervalued Oil & Gas Explorer, Near Developer Makes Solid Takeout Target

Source: Streetwise Reports

 

October 17, 2018 (Investorideas.com Newswire) A Pareto Securities note explained what the company has to offer, why it is attractive and what it could gain from an M&A-type deal.


In an Oct. 12 research report, analyst Tom Erik Kristiansen with Pareto Securities noted that Blackbird Energy Inc. (BBI:TSX.V) is an ideal takeout candidate, it is the right time in the cycle for mergers and acquisitions (M&A) activity, and such a transaction could help finance the company for project advancement and spark a repricing of its stock.

Kristiansen summarized Blackbird's highlights. It offers a "high-margin, development-ready portfolio" in the liquids-rich Montney Formation, Kristiansen wrote. Drill results to date have exceeded expectations. The company's operational netback last quarter was ahead of its peers, at CA$30 barrels of oil equivalent, which "highlights the attractiveness of its acreage in the current oil price environment."

Blackbird is undervalued and "too cheap to ignore," Kristiansen reiterated. Whereas Blackbird is trading at CA$2 million per section, its peers are trading around CA$12 million/section. This is largely because weak sentiment for oil and gas in Canada is keeping investors out of the sector. Several M&A transactions have occurred as a result, the analyst added, and such a deal makes sense for Blackbird.

Moving forward for Blackbird would entail increasing production to about 7,000 barrels of oil equivalent per day (7 Mboe/d) from the current 1–2 Mboe/d, once it obtained additional offtake capacity. To do so, however, it would need about CA$40–80 million, Kristiansen indicated, "dependent on its participation in midstream infrastructure."

Because Blackbird does not carry debt, much of the funds it would need could be covered by leverage as the company transitions into a developer. That being the case, the analyst noted, it is probable that the market may be "exaggerating" funding risk.

Following investment of that capital, Blackbird could then "recycle cash flow to fund further growth toward the greater than 100 Mboe/d long-term potential of its 114 net sections," added Kristiansen.

Pareto Securities has a Buy rating and a CA$1.10 per share price target on Blackbird, whose stock price is currently around CA$0.34 per share.

Disclosure:

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Blackbird Energy. Click here for important disclosures about sponsor fees.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Blackbird Energy, a company mentioned in this article.

Disclosures from Pareto Securities AS, Blackbird Energy, Update, October 12, 2018

This publication or report has been prepared solely by Pareto Securities Research.

Opinions or suggestions from Pareto Securities Research may deviate from recommendations or opinions presented by other departments or companies in the Pareto Securities Group. The reason may typically be the result of differing time horizons, methodologies, contexts or other factors.

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The research analysts whose names appears on research reports prepared by Pareto Securities Research received compensation that is based upon various factors including Pareto Securities’ total revenues, a portion of which are generated by Pareto Securities’ investment banking activities.

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