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Canaccord View On Cub Energy

|Includes:Cub Energy, Inc. (TPNEF)

Saw this on the Stockhouse site, I have pasted some interesting parts:

Cub announced that its Makeevskoye facilities are now expected to be commissioned in Q1/14. Cub also reported Q4/13 production levels of 1,687 boe/d and an exit rate of 2,070 boe/d, which reflects a 35% increase over the 2012 exit rate. During the quarter, Cub tested and tied in its 100% working interest RK-22 well, which is currently producing 1.9 MMcf/d (~320 boe/d). With a 2014 capital program of $23-27 million, the company intends to drill six 100% working interest wells (down from nine locations previously) and five 25-30% interest wells.

Cub Energy's recent operational update was positive with Q4 production results ~4% ahead of expectations, netting 1,687 boe/d versus our 1,626 boe/d estimate. During the quarter, Cub tested and tied in its 100% working interest RK-22 well. The RK-22 well tested 2.5 MMcf/d and is currently producing 1.9 MMcf/d.

With a 2014 capital program of $23-27 million, the company intends to drill six additional 100% working interest wells, versus previous plans for nine locations. The new plan calls for three locations on the RK block in Western Ukraine and two wells on the Stanovo block also in Western Ukraine). The Stanovo S-1 and S-2 wells are planned for Q4/14 and areconsidered exploration wells.

With a slight delay on Cub's facility expansion in Eastern Ukraine (into Q1 from January 2014), we have shifted ~400 boe/d of incremental production attributable to the facility out by approximately two months. In conjunction with Cub's revised drilling schedule, our 2014E production estimates have fallen ~15% from 3,200 to 2,700 boe/d. Notwithstanding, we still expect Cub to exit 2014E at over 3,000 boe/d (in line with current guidance of 2,800-3,100 boe/d).

Production is up which I expected. It is disappointing that the capital program will lead to lower than expected drilling but Canaccord still believes it is at least a double from here. Take that for its worth. So far so good for the 2014 stock of the year candidate.

Disclosure: I am long TPNEF, .

Stocks: TPNEF