Painted Pony’s appeal as take-out target at ‘all-time high’
Company reported 'strong' test results from 'world-class resource': analyst
Painted Pony Petroleum Ltd., a gas-weighted junior positioning itself as a supplier to West Coast liquefied natural gas projects, this week reported results from four horizontal wells in British Columbia’s Montney fairway.
Two wells in the lower Montney the company shares a 50 per cent working interest in tested at an average flow rate of 10.2 MMcf/d and 3.2 MMcf/d over a 12- and three-day period, respectively. Another two the company holds a 20 per cent working interest in tested at 5.6 MMcf/d and 8 MMcf/d, respectively, over a six-day stretch, the company said in a statement.
The results are strong, says FirstEnergy Capital analyst Cody Kwong. In a note yesterday, he points out that Painted Pony’s wells are, on average, outperforming those drilled by Progress Energy Resources Corp. on neighboring properties on an initial production, 12- and two-year basis.
The two companies share a working interest on some of the wells, but for a company its size, “Painted Pony has unique exposure to a world class resource,” Kwong says.
That may draw the interest of LNG developers in need of long-dated reserves to support export mega-projects and sales contracts with Asian gas users.
Such was the rationale behind the blockbuster purchase of Progress by Petronas, the state-run Malaysian oil and natural gas company that forked over $5.8 billion this summer to ward off a rival bidder for the Calgary intermediate.
Shell Canada, to take another example, has told the National Energy Board that it will fulfill future gas supply requirements for its massive LNG terminal at Kitimat through a combination of existing reserves, prospective resources and “future net acquisitions.”
Kwong has a $16.50 price target on Painted Pony – it currently trades at just shy of $10 a share – in no small part because he figures it’s next in line to be bought. “The company’s appeal as a natural take-out target is at an all-time high,” he says.