PrairieSky Royalty

PrairieSky Royalty* (PSK : TSX : $38.77), Net Change: 0.11, % Change: 0.28%, Volume: 279,422
EnCana* (ECA : TSX : $26.33), Net Change: -0.30, % Change: -1.13%, Volume: 3,288,463
Canadian Natural Resources* (CNQ : TSX : $48.57), Net Change: 0.76, % Change: 1.59%, Volume: 5,154,591
Cenovus Energy* (CVE : TSX : $34.16), Net Change: 0.27, % Change: 0.80%, Volume: 3,472,188
A TOUGH ACT TO FOLLOW. PrairieSky Royalty’s market debut has been incredible, shares have now risen nearly 37%
above its initial public offering price of $28.00 per common share. The success of PSK has forced the likes of Canadian Natural Resources and Cenovus to have a second look at their royalty lands.

According to Canaccord , the PSK read-through for CVE’s royalty lands, should the company decide to do a spinout, is ~$2.8 billion and $3.70/share (by land value). It would be $2.3-2.5 billion or ~$2.20/share for CNQ’s royalty lands. Some more “timbits” from both companies this emerged last week.

At its investor day last Tuesday, CNQ President Steve Laut said (as quoted by The Calgary Herald), “Right now we’re in the process to make sure we understand what we have and then we’re going to evaluate all the options including the PrairieSky option…Obviously, it looks attractive but we’re going to evaluate all the options and
whichever creates the most value for shareholders, that’s the one we’ll choose. And we’ll do that by the end of the year.”

With respect to CVE, the company was recently marketing overseas with another Bay Street broker. One takeaway from the meetings was CVE is not in any rush to monetize its third party royalty production. Recall, the company did state on its Q1/14 call that there were no “current” plans to change the nature of how it owns the lands but it has the obligation to maximize value and planned to monitor how other transactions proceeded

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