Penn Virginia Corporation Target Price $14

PVA : NYSE : US$11.31
Target: US$14.00

Penn Virginia Corporation is an exploration and production
company with operations in Texas, the Mid-Continent, Appalachia
and Mississippi.
All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
Investment recommendation
PVA has successfully transitioned to a liquids-focused company while
retaining its leverage to an improvement in natural gas prices. The
company has built a sizeable position in the volatile oil window of the
Eagle Ford (EF) Shale and has generated solid results with the drillbit
while bringing costs down at the same time.
Investment highlights
 PVA has 72.2K net acres (and growing) in the EF, a very meaningful
position for a company its size. This represents a 10 year inventory,
with upside from downspacing and other formations, including the
upper EF which is in the early testing stages.
 Based on Devon’s announced acquisition of GeoSouthern’s EF
assets for $6B (82K net acres, 53 MBoe/d of production), PVA’s EF
assets alone (12.5 MBoe/d of production in Q3/13) could be worth
well over $2B, more than the EV of the entire company.
 In October, the company’s borrowing base was increased from
$350M to $425M. Pro forma liquidity at September 30, 2013 was
~$330M. Liquidity should be enhanced in H1/14 from the sale of the
EF gas gathering/gas pipeline assets (~$95M net to PVA, already
announced) and the divestiture of the Selma Chalk and Granite
Wash assets, which we believe could bring in as much as $150M.
Our new $14.00 price target is a ~15% discount from a $16.50 NAV. The
old price target of $12.00 was the same discount from a ~$14 NAV


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