Northland Power released it's second quarter results recently and it experienced another solid quarter.Northland is a little different than many traditional power generators.It has quite a few Canadian operations including solar and wind based generators but it also has a new wind farm in the North Sea.It is a massive operation and took massive financing.It has completed it's financing now and has started construction.The completion date is expected to be 2017.
The second quarter
Sales were up, from $124 million in Q2 2013 to $170 million in 2014.Free cash flow was up 43 % over last year while it was up by 87% in Q1 2014 over the same quarter in 2013.However Northland had significant non-cash charges and showed a net loss of $61 million compared to net income of $75 million in Q2 2013.Because of heavy capital write-offs and interest charges a better measure of performance for most utilities(including Northland) is adjusted EBITDA.For example, Northland(NPI) had a net loss for the first half of 2014 of $46 million in comparison to a net income of $100 million for the first half of 2013.But EBITDA which allows for financing and foreign exchange gains and losses has been raised by NPI from $305 million to $350 TO $360 million for 2014.This presumably does cover preliminary financing charges for their huge wind farm called Gemini.In addition,NPI raised guidance for 2015 up to $380 to $400 million.
The impact of Gemini
The total capital cost of Gemini will be around EUR$2.8 billion.It took awhile to arrange financing but it is now completed.Financing charges will affect it's earnings and earnings per share but these are non-cash charges and most will not affect cash flow.However for large capital projects like Gemini many investors will use EBITDA as a guide.The only problem is that it can put a strain on the payout ratio which will remain high until Gemini is finished.NPI says that their dividend is safe and this blog believes that it is.After all they just raised their guidance for both 2014 and 2015.
Tuesday 26 August 2014
Tuesday 12 August 2014
Pengrowth Energy- a successful driller
Pengrowth Energy released it's second quarter results last week and it was adequate but not great.Pengrowth is working hard to develop it's heavy oil property called Lindberg for the fourth quarter.So Pengrowth inked an agreement with Husky Oil for delivery of heavy oil.This will assure cash flow for it's new oil and should be seen as a good move although the cost is unknown.It also shows an increase in reserves at Lindberg which will extend the life of the Lindberg pool.
The Cardium
Pengrowth has spent a good portion of their capital expenditures on the Cardium area of Alberta.Pengrowth(PGF) has developed a few fields here and had an excellent drilling record.They report a 100 % drilling rate.But this is likely all horizontal drilling and vertical drilling in a well delineated pool or pools.They have not extended their field with any or not many exploratory drilling.There may be accessible oil that has not been explored which could easily increase their production if true.This will be important in the next quarter if production does not rise. As it should not be that expensive and PGF has a good cash balance on hand.
The other areas
PGF has significant acreage in the Mannville area of Alberta and in the Swan Hills area.This blog( in an earlier blog) advocated PGF to take a position in Perpetual Energy which has properties near it's properties and not a huge market cap.PGF missed this opportunity and Perpetual got another partner even though PGF needed this increase in production.Perpetual is also developing it's Mannville sands property and would make a good partner for PGF.PGF could get a JV agreement with Perpetual to develop it's Mannville property and pay some of it's cash on hand.
PGF also has significant acreage in the Swan Hills area which is primarily a natural gas area.Perpetual might take a farm-in agreement here too . Or PGF could talk to Lightstream Resources which has just developed a battery that will eventually produce up to 3500 barrels of oil per day.Lightstream needs cash and would make an excellent partner.PGF expects to spend only about $220 million on capital expenses for the rest of the year and this will just not "cut it".They need new production in the third quarter before the well awaited Lindberg comes onstream.However PGF still produces almost double the barrels per day of Lightstream Resources and ten times juniors like Argent Energy or BNK Petroleum;so it seems to be fairly valued.
The Cardium
Pengrowth has spent a good portion of their capital expenditures on the Cardium area of Alberta.Pengrowth(PGF) has developed a few fields here and had an excellent drilling record.They report a 100 % drilling rate.But this is likely all horizontal drilling and vertical drilling in a well delineated pool or pools.They have not extended their field with any or not many exploratory drilling.There may be accessible oil that has not been explored which could easily increase their production if true.This will be important in the next quarter if production does not rise. As it should not be that expensive and PGF has a good cash balance on hand.
The other areas
PGF has significant acreage in the Mannville area of Alberta and in the Swan Hills area.This blog( in an earlier blog) advocated PGF to take a position in Perpetual Energy which has properties near it's properties and not a huge market cap.PGF missed this opportunity and Perpetual got another partner even though PGF needed this increase in production.Perpetual is also developing it's Mannville sands property and would make a good partner for PGF.PGF could get a JV agreement with Perpetual to develop it's Mannville property and pay some of it's cash on hand.
PGF also has significant acreage in the Swan Hills area which is primarily a natural gas area.Perpetual might take a farm-in agreement here too . Or PGF could talk to Lightstream Resources which has just developed a battery that will eventually produce up to 3500 barrels of oil per day.Lightstream needs cash and would make an excellent partner.PGF expects to spend only about $220 million on capital expenses for the rest of the year and this will just not "cut it".They need new production in the third quarter before the well awaited Lindberg comes onstream.However PGF still produces almost double the barrels per day of Lightstream Resources and ten times juniors like Argent Energy or BNK Petroleum;so it seems to be fairly valued.
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