Analysts Offer Up Three Alternative to Duvernay Oil

by: FP Trading Desk

Shell Canada Ltd.'s proposed C$5.9-million acquisition of Duvernay Oil Corp. (OTC:DVNLF) has analysts chatting up the tremendous resource value in the Montney shale natural gas play in northeast B.C., and offering up some Duvernay replacements to invest in.ff

BMO Capital Markets analyst Gordon Tait said the C$83 per share Duvernay deal, which is worth well above the average transaction prices paid over the past year, is a positive development for ARC Energy Trust (OTCPK:AETUF).

In particular, he said ARC investors can draw favorable comparisons to Duvernay's sale metrics which equates toC $188,910 per daily barrel of oil equivalent and C$38.87 per proved and probable barrel of oil equivalent of reserves.

In a note to clients, the analyst said:

We note that ARC Energy has significant resource exposure in the B.C. Montney zone with over 120 net sections of undeveloped land.

Using a more conservative estimate of $25 per proved and probable boe of reserves for ARC's interests in the Montney (20% recovery factor), we estimate a risk-adjusted resource potential of approximately $7 per unit net to the trust.

The analyst added that his current target price of C$34.50 includes only about a C$3.50 per unit valuation for the trust's Montney lands.

Raymond James analyst Stephen Calderwood, meanwhile offered up not one, but three names for investors to consider following Shell's bid for Duvernay. 

He recommends shareholders sell Duvernay and "re-invest the cash in other natural gas weighted junior E&P companies with sizable Triassic gas exposure," such as ProEx Energy Ltd. (OTC:PXEYF) , Crew Energy Inc. (OTCPK:CWEGF) and Birchcliff Energy Ltd. (OTCPK:BIREF).

Mr. Calderwood has "outperform" ratings on all three stocks.