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Don't Do The Pengrowth Energy Shuffle


  • There is now a C$300 million sale that effectively replaces the terminated C$180 million sale.
  • This new sale results in the sale of a significant amount of production, yet the annual cash flow guidance has not been adjusted.
  • The company is still likely to violate its covenants in the third or fourth quarter without additional property sales.
  • Most managements would shelve the expansion of Lindbergh with its WTI $46 breakeven and look for other, lower breakeven projects.
  • The stock is still an avoid until a viable future plan appears.

Pengrowth Energy (PGH) management has not improved their outlook with the recent announcement enough to make the stock a consideration. This stock remains a "run the other direction fast" consideration for the foreseeable future. Management announced the collapse of one of the agreements to sell part of the Swan Hills acreage for C$180 million. That important non-achievement was listed far below the top line achievement of selling other properties for C$300 million. That allowed management to "shuffle" sales so that Mr. Market's attention is now focused on the new sale. Time may be getting desperately short for these sales.

But -- and this is a big deal -- this new sale "drew blood" which may be sign of the desperation of management. Plus the stock market reaction was absolutely nothing to get excited about today. The "blood" part:

The Olds/Garrington area assets are expected to generate 2017 average daily production of 13,875 barrels of oil equivalent per day (boe per day), and had Proved plus Probable (2P) reserves of 78 million boe as at December 31, 2016, as per the GLJ Petroleum Consultants independent reserve valuation dated December 31, 2016. The assets include facilities and gathering systems related to the oil and gas properties being sold, as well as the Olds Gas plant.

That is some very serious production numbers for the size of this company. It was very interesting that management has not provided a new cash flow guidance as a result of this sale.

Source: Pengrowth Energy Q1 2017 Earnings Press Release

A significant production sale will most likely affect the above warning. It is very clear from the above that management needed to move fast when it became apparent that one of the Swan Hills deal would collapse. Since commodity prices are lower a second attempt to sell the

This article was written by

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I am a high school teacher for a decade. I am now retired.  Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland. I have a high school teaching credential and an MA in Math Education

Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research

Occassionally write articles on Tag Oil for the Panick High Yield Report


Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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