Penn Virginia Corporation OVERSOLD, REITERATE BUY

PVA : NYSE : US$14.78
Target: US$20.00

Energy — Oil and Gas, Exploration and Production
Investment recommendation
PVA has been successfully transitioning to a liquids-focused company
while retaining its leverage to an improvement in natural gas prices.
The company has built a sizeable ~87K net acre position in the volatile
oil window of the Eagle Ford (EF) and has generated solid results with
the drillbit while bringing costs down at the same time. We remain
buyers, especially after the recent correction in the stock.
Investment highlights
 PVA announced that it has entered into a definitive agreement to
sell its Mississippi assets to an undisclosed buyer for gross cash
proceeds of $72.7M. The sale is expected to close next month. Our
expectations were that the company would get something closer to
PV-10 for these assets, which was ~$55M at YE 2013, and are
therefore pleased with the $72.7M price tag. Further liquidity
enhancing asset sale announcements should be forthcoming shortly.
 The stock sold off for two days (before rebounding yesterday) over
concerns about the company’s EF EURs. EURs have not gone down;
PVA is now showing both its internal estimates, which it recently
raised, and its reserve engineer’s EURs, which are more
 As a reminder, PVA recently upped its EF inventory by 34% (now
1,510 gross locations, up from 1,125) as it is now including the
Upper EF as a distinct horizon (475 gross locations)


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