DCK : TSX-V : C$2.18 SPECULATIVE BUY
Target: C$4.00
COMPANY DESCRIPTION:
Donnycreek is a junior pure play Montney exploration and
development company with assets in Alberta’s Deep
Basin. Donnycreek trades under the symbol “DCK” on the
TSX venture exchange.
All amounts in C$ unless otherwise noted.
Investment recommendation
Donnycreek released a brief operational update this morning on its
operations at Kakwa. The wells on the company’s three well Montney
pad (the company’s first 1.5 mile horizontals) have been successfully
completed and tested, however no test rates were provided with the
release. The company also announced a plant turn-around at Kakwa,
which will shut in production from the block for ~16 days in September,
and plans to expand the plant on the block from 15mmcf/d to 30
mmcf/d in the spring of 2015.
In our view, a fairly neutral release from the company; however, given
the delays in bringing on production at Kakwa, we have lowered our
production estimates for 2014 . Trading at just 3.1x 2015E
EV/DACF and 0.5x Base NAV (lowest NAV multiple in our coverage
universe), we continue to believe DCK is extremely undervalued relative
to its peers.
We continue to rate the stock a Speculative Buy, and look to November
for IP30 rates on the 3 recently completed 1.5 mile Hz’s (in addition to
the large production bump)as significant potential catalysts for the stock.
Highlights from the release
Kakwa 3 well pad. DCK announced that all three 50% working
interest wells from the company’s first three well pads have been
completed and flow tested . These wells were drilled with
horizontal lengths of 1,900m, which is longer than wells previously
drilled on this acreage. The wells are expected to come on
production in October.
Facility expansion. Donnycreek and its partners are currently
designing an expansion for its 16-7 facility to double the throughput
capacity to 30 mmcf/d of natural gas and associated liquids. DCK
and its partners plan to start-up the expansion by spring 2015.
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