Canada Research Published by Raymond James Ltd. Please read domestic and foreign disclosure/risk information beginning on page 25 and Analyst Certification on page 24. Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2 Energy August 19, 2015 Industry Comment Canadian Energy Midweek: Mourning the Death of Journalism & Begging the Demise of the New Propaganda Never before have we had access to more media, both professional and social. In the context of the energy business it is virtually a daily event that we see stories that include references to objecting to new Canadian energy export project (pipelines or implied incremental tanker traffic) due to stated safety concerns with no actual journalistic efforts apparent to address the question of transport safety in energy. These days, accessing airwaves for print, voice or video is open for virtually anyone with access to bandwidth, and the public’s appetite for volume of this product seemingly overwhelms any concerns of the validity of what is said. Sadly, aviation accidents can too often involve high casualty levels in a single accident but on the whole the industry is exceptionally safe. To the aviation industry’s credit the global trend is toward fewer and fewer deaths per million flight departures as safety has consistently improved. This, and the fact that aviation travel is absolutely basic to maintaining economic growth, is why we don’t debate whether we should stop flying when fatal airplane accidents happen. Last year the Bureau of Aircraft Accident Archives reported 1,328 fatalities in aircraft accidents. This is less than 50 fatalities for every million flight departures. Every one of those deaths was tragic but we correctly rarely question the industry’s already outstanding record on safety. We wish energy transportation safety was addressed in a similar light. The International Tanker Owners Pollution Federation (ITOPF) was established in 1968 in the wake of the Torrey Canyon oil tanker spill that happened off the coast of England. They have since tracked global energy tanker safety. For years the number of global tanker events has been far below 10 events per annum while more than 10,000 billion tonne-miles were traveled by oil tankers last year. The ITOPF reports the total volume of oil spilled last year was 4,000 tonnes (or 28,000 barrels). Annual tanker transportation of oil (ignoring refined products and LNG) is in the order 34 million barrels per day or 12.46 billion barrels per annum. So, 28,000 barrels spilled against 12.46 billion barrels transported is 2.25 barrels spilled per million barrels transported. Yet how often do we read, hear, or see comments asserting concerns of tanker safety as a reason why people object to the idea of greater oil tanker traffic. The simple truth is tanker safety is far better than airline safety. The same is true of pipelines. The Transport Safety Board of Canada reported a total of 8 oil spill events last year associated with federally regulated oil pipelines. This represented less than 13,522 barrels of oil released from federally regulated pipeline relative to 1.4 billion total barrels of oil transported on those lines. This is an accident rate of 9.7 barrels per million barrels of oil transported. So we have a simple question. Where is the journalism to challenge assertions that pipelines or tanker are unsafe or represent too much risk? Hydrocarbons are more fundamental to global economic growth and wellbeing than even air transportation and have a transportation safety record that is arguably better than the airline business yet daily headlines would suggest just the opposite. It is simple. Global growth and development does not happen without increased consumption of hydrocarbons. Transportation of people and goods, growing food, and the building of virtually any globally relevant product is accessible and affordable due to hydrocarbons. An accidental benefit is that the global oil and gas industry is also very capital intensive, meaning heavy spending every year which delivers millions of direct jobs and derivative opportunities. Further, the industry generates high paying jobs and pays healthy taxes to government coffers at the Kurt Molnar 403.221.0414 [email protected]Chris Cox CFA 403.509.0523 [email protected]Andrew Bradford CFA 403.509.0503 [email protected]Gordon Steppan CFA (Associate) 403.221.0411 [email protected]Braden Purkis (Associate) 403.509.0518 [email protected]Michael Barth (Associate) 403.509.0511 [email protected]Tim Monachello (Associate) 403.509.0562 [email protected]
Transcript
Canada Research Published by Raymond James Ltd.
Please read domestic and foreign disclosure/risk information beginning on page 25 and Analyst Certification on page 24. Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Energy August 19, 2015 Industry Comment
Canadian Energy Midweek: Mourning the Death of Journalism & Begging the Demise of the New Propaganda
Never before have we had access to more media, both professional and social. In the context of the energy business it is virtually a daily event that we see stories that include references to objecting to new Canadian energy export project (pipelines or implied incremental tanker traffic) due to stated safety concerns with no actual journalistic efforts apparent to address the question of transport safety in energy. These days, accessing airwaves for print, voice or video is open for virtually anyone with access to bandwidth, and the public’s appetite for volume of this product seemingly overwhelms any concerns of the validity of what is said.
Sadly, aviation accidents can too often involve high casualty levels in a single accident but on the whole the industry is exceptionally safe. To the aviation industry’s credit the global trend is toward fewer and fewer deaths per million flight departures as safety has consistently improved. This, and the fact that aviation travel is absolutely basic to maintaining economic growth, is why we don’t debate whether we should stop flying when fatal airplane accidents happen. Last year the Bureau of Aircraft Accident Archives reported 1,328 fatalities in aircraft accidents. This is less than 50 fatalities for every million flight departures. Every one of those deaths was tragic but we correctly rarely question the industry’s already outstanding record on safety.
We wish energy transportation safety was addressed in a similar light. The International Tanker Owners Pollution Federation (ITOPF) was established in 1968 in the wake of the Torrey Canyon oil tanker spill that happened off the coast of England. They have since tracked global energy tanker safety. For years the number of global tanker events has been far below 10 events per annum while more than 10,000 billion tonne-miles were traveled by oil tankers last year. The ITOPF reports the total volume of oil spilled last year was 4,000 tonnes (or 28,000 barrels). Annual tanker transportation of oil (ignoring refined products and LNG) is in the order 34 million barrels per day or 12.46 billion barrels per annum. So, 28,000 barrels spilled against 12.46 billion barrels transported is 2.25 barrels spilled per million barrels transported. Yet how often do we read, hear, or see comments asserting concerns of tanker safety as a reason why people object to the idea of greater oil tanker traffic. The simple truth is tanker safety is far better than airline safety. The same is true of pipelines. The Transport Safety Board of Canada reported a total of 8 oil spill events last year associated with federally regulated oil pipelines. This represented less than 13,522 barrels of oil released from federally regulated pipeline relative to 1.4 billion total barrels of oil transported on those lines. This is an accident rate of 9.7 barrels per million barrels of oil transported.
So we have a simple question. Where is the journalism to challenge assertions that pipelines or tanker are unsafe or represent too much risk? Hydrocarbons are more fundamental to global economic growth and wellbeing than even air transportation and have a transportation safety record that is arguably better than the airline business yet daily headlines would suggest just the opposite.
It is simple. Global growth and development does not happen without increased consumption of hydrocarbons. Transportation of people and goods, growing food, and the building of virtually any globally relevant product is accessible and affordable due to hydrocarbons. An accidental benefit is that the global oil and gas industry is also very capital intensive, meaning heavy spending every year which delivers millions of direct jobs and derivative opportunities. Further, the industry generates high paying jobs and pays healthy taxes to government coffers at the
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
corporate and individual level. The energy business delivers wealth and prosperity literally to billions of people and it does so very safely.
Too many either do not know or appreciate these fundamental truths. Worse still, many know these truths but seek to tell the public something totally different. We don’t want to end media but we think citizens should demand a return of actual journalism with investigation and debate of facts and realities, not just popular sound bites. We also think the public needs to demand an end to those who act as little more than propagandists stating prejudiced views when the facts simply don’t support those assertions.
Company Ticker(s) Current Target Price Dividend Total Return Suitability Rating Primary Secondary Price (6-12 months) Yield To Target
Energy Infrastructure | Midstream AltaGas Ltd. ALA-TSX C$34.43 C$44.00 5% 33% TR OP2 Gibson Energy Inc. GEI-TSX C$18.16 C$22.00 7% 28% TR MP3 Inter Pipeline Ltd. IPL-TSX C$29.36 C$30.00 5% 8% TR MP3 Keyera Corp KEY-TSX C$43.40 C$51.00 4% 21% TR OP2 Pembina Pipeline Corp. PPL-TSX PBA-NYSE C$37.40 C$50.00 5% 39% TR OP2 Veresen Inc. VSN-TSX C$14.01 C$15.00 8% 15% TR MP3 Senior Oil & Gas Producers Canadian Natural Resources Ltd CNQ-TSX CNQ-NYSE C$30.07 C$39.00 3% 32% G OP2 Cenovus Energy CVE-TSX CVE-NYSE C$17.57 C$23.00 3% 34% G OP2 Husky Energy Inc. HSE-TSX C$23.50 C$25.00 5% 11% G MP3 Imperial Oil Limited IMO-TSX IMO-NYSE
MKT C$47.50 C$52.00 1% 11% G MP3
Suncor Energy Inc SU-TSX SU-NYSE C$36.60 C$41.00 3% 15% G OP2 Intermediate Oil & Gas Producers ARC Resources Ltd. ARX-TSX C$18.55 C$24.50 6% 38% HR MP3 Athabasca Oil Corp. ATH-TSX C$1.47 C$2.75 0% 87% HR OP2 Baytex Energy Corp. BTE-TSX BTE-NYSE C$8.38 C$15.00 10% 89% AG MP3 Birchcliff Energy Ltd. BIR-TSX C$5.87 C$11.50 0% 96% HR OP2 Crescent Point Energy CPG-TSX CPG-NYSE C$16.33 C$30.00 7% 90% G OP2 Crew Energy Inc. CR-TSX C$4.36 C$7.50 0% 72% HR SB1 Kelt Exploration Ltd. KEL-TSX C$6.18 C$9.50 0% 54% HR OP2 NuVista Energy Ltd. NVA-TSX C$5.13 C$9.00 0% 75% HR OP2 Paramount Resources Ltd. POU-TSX C$14.38 C$36.00 0% 150% HR SB1 Pengrowth Energy Corporation PGF-TSX PGH-NYSE C$1.62 C$3.25 12% 113% AG MP3 Peyto Exploration and Development PEY-TSX C$28.09 C$39.00 5% 43% G OP2 Seven Generations Energy Ltd. VII-TSX C$13.98 C$25.00 0% 79% HR OP2 Tourmaline Oil Corp. TOU-TSX C$32.11 C$50.00 0% 56% HR OP2 Trilogy Energy Corp. TET-TSX C$3.87 C$10.00 0% 158% HR MP3 Junior Oil & Gas Producers Boulder Energy Ltd. BXO-TSX C$5.14 C$12.00 0% 133% HR OP2 Chinook Energy Inc. CKE-TSX C$0.66 C$1.60 0% 142% HR OP2 Delphi Energy Corp. DEE-TSX C$0.76 C$2.00 0% 163% HR SB1 Granite Oil Corp. GXO-TSX C$5.52 C$10.50 8% 99% HR SB1 Leucrotta Exploration Inc. LXE-TSXV C$0.89 C$1.65 0% 85% HR OP2 RMP Energy Inc. RMP-TSX C$1.62 C$3.25 0% 101% HR OP2 Storm Resources Ltd. SRX-TSXV C$4.04 C$6.50 0% 61% HR OP2 Oil Sands Canadian Oil Sands Limited COS-TSX C$6.49 C$9.00 3% 41% AG MP3 MEG Energy Corp. MEG-TSX C$11.39 C$22.00 0% 93% AG OP2 Oil & Gas Energy Services | Contract Drillers Ensign Energy Services Inc. ESI-TSX C$9.89 C$9.00 5% -4% HR MP3 Precision Drilling Corporation PD-TSX PDS-NYSE C$5.94 C$6.50 4% 14% HR MP3 Savanna Energy Services SVY-TSX C$1.48 C$2.75 0% 86% HR SB1 Trinidad Drilling Ltd. TDG-TSX C$2.75 C$3.75 6% 42% HR OP2 Western Energy Services Corp. WRG-TSX C$5.08 C$5.50 6% 14% HR MP3 Oil & Gas Energy Services | Pressure Pumpers Calfrac Well Services CFW-TSX C$4.95 C$9.75 3% 100% HR MP3 Canyon Services Group Inc. FRC-TSX C$4.56 C$8.00 4% 79% HR MP3 Trican Well Service TCW-TSX C$1.20 C$1.00 0% -17% HR UP4 Oil & Gas Energy Services | Well Site & Other Services Essential Energy Services Ltd. ESN-TSX C$0.81 C$1.40 7% 80% HR OP2 McCoy Global MCB-TSX C$3.40 C$4.50 5% 38% AG MP3
Energy Canada Research | Page 3 of 29
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Company Ticker(s) Current Target Price Dividend Total Return Suitability Rating Primary Secondary Price (6-12 months) Yield To Target
Mullen Group Ltd. MTL-TSX C$18.42 C$20.50 6% 17% AG MP3 Strad Energy Services Ltd. SDY-TSX C$2.70 C$3.90 10% 55% HR OP2 Oil & Gas Energy Services | Facilities & Infrastructure Black Diamond Group Limited BDI-TSX C$10.10 C$15.75 9% 64% AG OP2 Enerflex Ltd. EFX-TSX C$11.71 C$15.00 3% 31% AG OP2 Horizon North Logistics Inc. HNL-TSX C$2.68 C$2.90 13% 21% AG MP3 Secure Energy Services Inc. SES-TSX C$9.84 C$15.50 2% 60% AG SB1 Note: TR - Total Return, G - Growth, AG - Aggressive Growth, HR - High Risk, VR - Venture Risk; SB1 - Strong Buy, OP2 - Outperform, MP3 - Market Perform, UP4 - Underperform, UR - Under Review, R - Restricted.
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Canada Research | Page 4 of 29 Energy
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
*This analysis does not include transaction costs and tax considerations. If included these costs could reduce an investor's return. Past performance is not indicative of future results
Sources: Bloomberg, RaymondJames Ltd.
MTD Week
Total Returns Capital Returns (%)
52-Week
Low
52-Week
Hi 1-Yr YTD QTD 1-Mo
PRE
SVY
ZAR
SU
HSE
Forex
TSX
NYMEX Gas
WTI
Oil Sands Producers
Oilfield Services
Domestic E&Ps
POU
BDI
TBE
BTE
TCW
-70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30%
SVY
BIR
TET
Forex
WTI
PEY
HNL
TSX
NYMEX Gas
Domestic E&Ps
Oil Sands Producers
Oilfield Services
BTE
TBE
CKE
BDI
TCW
-65% -55% -45% -35% -25% -15% -5% 5% 15%
Canada Research | Page 20 of 29 Energy
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Junior Producers
Company Closing Target Stock Target Mkt Cap Current
Name Symbol Price Price Rating Return ($mln) Yield NAV 15E 16E 15E 16E 15E 16E 15E 16E 15E 16E P P+P 15E 16E 15E 16E Analyst
Boulder BXO $5.00 $12.00 OP 2 140.0% $232 0.0% NA $1.14 $1.95 4.4x 2.6x 5,764 9,325 24% 24% $63,908 $39,504 $14.79 $10.60 6.9x 3.8x 2.6x 1.6x KM
Chinook CKE $0.63 $1.60 OP 2 154.0% $136 0.0% NA $0.05 $0.10 13.9x 6.4x 6,850 8,900 71% 75% $12,978 $9,988 $5.56 $3.54 3.2x nmf nmf nmf KM
Delphi DEE $0.73 $2.00 SB 1 174.0% $114 0.0% NA $0.25 $0.35 2.9x 2.1x 10,013 10,675 71% 70% $24,201 $22,700 $6.70 $3.93 6.2x 3.9x 3.3x 2.5x KM
Name Symbol Price Price Rating Return ($mln) $/sh Yield 15E 16E 15E 16E 15E 16E 2P (mmbl) BE Cont. NAV P/NAV 15E 16E 15E 16E 15E 16E Analyst
Canadian Oil Sands COS $6.35 $9.00 MP 3 44.9% $3,077 $0.20 3.1% $0.95 $1.46 6.7x 4.3x 99,194 102,872 1,609 1,700 $8.92 0.7x $499 $945 10.7x 5.7x 4.4x 2.1x CC
MEG Energy MEG $11.68 $22.00 OP 2 88.4% $2,630 $0.00 0.0% $1.09 $1.81 10.8x 6.5x 81,143 84,718 3,006 3,793 $22.28 0.5x $169 $667 41.2x 10.4x 25.3x 6.7x CC
Median 66.6% 8.7x 5.4x 0.6x 26.0x 8.0x 14.9x 4.4x
D/CF
D/CF
ND/EBITDA
ND/EBITDAEBITDA EV/EBITDA
EV/EBITDA
EV/EBITDA
EV/EBITDA
EV/BOE
EV/BOE
Dividends CFPS P/CF Production Recoverable Resource
CFPS
% Gas
% Gas EV/BOE/d
EV/BOE/dCFPS
P/CF
ProductionP/CF
Production
P/CF EBITDADividends CFPS Production % Gas
Source: Capital IQ, Raymond James Ltd.
Energy Canada Research | Page 21 of 29
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Energy Services
Company Closing Target Stock Target Mkt Cap Debt/Name Symbol Price Price Rating Return ($mln) $/sh Yield 15E 16E 15E 16E 15E 16E 15E 16E EBITDA 15E 16E 15E 16E Analyst
Energy InfrastructureCompany Closing Target Stock Target Mkt Cap CapexName Symbol Price Price Rating Return ($mln) $/sh Yield 15E 16E 15E 16E 15E 16E 15E 16E 15E 15E 16E 15E 16E 15E 16E Analyst
AltaGas ALA $34.13 $44.00 OP 2 34.5% $4,635 $1.92 5.6% $2.82 $3.43 8.3% 10.0% $604 $705 14.2x 12.8x $633 66% 56% $3,137 $3,458 5.2x 4.9x CC
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Energy Canada Research | Page 23 of 29
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
IMPORTANT INVESTOR DISCLOSURES Raymond James & Associates (RJA) is a FINRA member firm and is responsible for the preparation and distribution of research created in the United States. Raymond James & Associates is located at The Raymond James Financial Center, 880 Carillon Parkway, St. Petersburg, FL 33716, (727) 567-1000. Non-U.S. affiliates, which are not FINRA member firms, include the following entities which are responsible for the creation and distribution of research in their respective areas; In Canada, Raymond James Ltd., Suite 2100, 925 West Georgia Street, Vancouver, BC V6C 3L2, (604) 659-8200; In Latin America, Raymond James Latin America, Ruta 8, km 17, 500, 91600 Montevideo, Uruguay, 00598 2 518 2033; In Europe, Raymond James Euro Equities, SAS, 40, rue La Boetie, 75008, Paris, France, +33 1 45 61 64 90, and Raymond James Financial International Ltd., Broadwalk House, 5 Appold Street, London, England EC2A 2AG, +44 203 798 5600.
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ANALYST INFORMATION
Analyst Compensation: Equity research analysts and associates at Raymond James are compensated on a salary and bonus system. Several factors enter into the compensation determination for an analyst, including i) research quality and overall productivity, including success in rating stocks on an absolute basis and relative to the local exchange composite Index and/or a sector index, ii) recognition from institutional investors, iii) support effectiveness to the institutional and retail sales forces and traders, iv) commissions generated in stocks under coverage that are attributable to the analyst’s efforts, v) net revenues of the overall Equity Capital Markets Group, and vi) compensation levels for analysts at competing investment dealers.
Analyst Stock Holdings: Effective September 2002, Raymond James equity research analysts and associates or members of their households are forbidden from investing in securities of companies covered by them. Analysts and associates are permitted to hold long positions in the securities of companies they cover which were in place prior to September 2002 but are only permitted to sell those positions five days after the rating has been lowered to Underperform. The Analyst and/or Associate or a member of his/their household has a long position in the securities of Delphi Energy Corp. The Analyst and/or Associate or a member of his/their household has a long position in the securities of Paramount Resources Ltd. The Analyst and/or Associate or a member of his/their household has a long position in the securities of Storm Resources Ltd. The Analyst and/or Associate or a member of his/their household has a long position in the securities of Trinidad Drilling Ltd. The Analyst and/or Associate or a member of his/their household has a long position in the securities of Trilogy Energy Corp.
Canada Research | Page 24 of 29 Energy
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The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.
RATINGS AND DEFINITIONS
Raymond James Ltd. (Canada) definitions: Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold.
Raymond James & Associates (U.S.) definitions: Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months. Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.
Raymond James Latin American rating definitions: Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.
Raymond James Europe (Raymond Euro Equities SAS & Raymond James Financial International Limited) rating definitions: Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon.
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Suitability Categories (SR): Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal. Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, at least a small dividend, and the potential for long-term price appreciation. Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings and acceptable, but possibly more leveraged balance sheets. High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and risk of principal. Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, and a substantial risk of principal.
RATING DISTRIBUTIONS
Coverage Universe Rating Distribution* Investment Banking Distribution
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RAYMOND JAMES RELATIONSHIP DISCLOSURES
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Company Name Disclosure
AltaGas Ltd. Raymond James Ltd. makes a market in the securities of AltaGas Ltd..
Baytex Energy Corp. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Baytex Energy Corp..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Baytex Energy Corp..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Baytex Energy Corp..
Raymond James Ltd. makes a market in the securities of Baytex Energy Corp..
Rusty Goepel who is an employee of Raymond James Ltd. or its affiliates serves as a director of Baytex Energy Corp..
Birchcliff Energy Ltd. Raymond James Ltd. makes a market in the securities of Birchcliff Energy Ltd..
Black Diamond Group Limited Raymond James Ltd - the analyst and/or associate has viewed the material operations of Black Diamond Group Limited.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Black Diamond Group Limited.
Raymond James Ltd. has provided non-investment banking securities-related services within the last 12 months with respect to Black Diamond Group Limited.
Raymond James Ltd. has received compensation for services other than investment banking within the last 12 months with respect to Black Diamond Group Limited.
Boulder Energy Ltd. Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Boulder Energy Ltd..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Boulder Energy Ltd..
Calfrac Well Services Raymond James Ltd - the analyst and/or associate has viewed the material operations of Calfrac Well Services.
Canadian Natural Resources Ltd Raymond James Ltd - the analyst and/or associate has viewed the material operations of Canadian Natural Resources Ltd.
Raymond James Ltd. makes a market in the securities of Canadian Natural Resources Ltd.
Canadian Oil Sands Limited Raymond James Ltd - the analyst and/or associate has viewed the material operations of Canadian Oil Sands Limited.
Canyon Services Group Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Canyon Services Group Inc..
Cenovus Energy Raymond James Ltd - the analyst and/or associate has viewed the material operations of Cenovus Energy.
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Cenovus Energy.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Cenovus Energy.
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Cenovus Energy.
Crescent Point Energy Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Crescent Point Energy.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Crescent Point Energy.
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Crescent Point Energy.
Crew Energy Inc. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12
Canada Research | Page 26 of 29 Energy
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Company Name Disclosure
months with respect to Crew Energy Inc..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Crew Energy Inc..
Enerflex Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Enerflex Ltd..
Ensign Energy Services Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Ensign Energy Services Inc..
Essential Energy Services Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Essential Energy Services Ltd..
Gibson Energy Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Gibson Energy Inc..
Granite Oil Corp. Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Granite Oil Corp..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Granite Oil Corp..
Horizon North Logistics Inc. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Horizon North Logistics Inc..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Horizon North Logistics Inc..
Inter Pipeline Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Inter Pipeline Ltd..
Kelt Exploration Ltd. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Kelt Exploration Ltd..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Kelt Exploration Ltd..
Keyera Corp Raymond James Ltd - the analyst and/or associate has viewed the material operations of Keyera Corp.
Raymond James Ltd. makes a market in the securities of Keyera Corp.
McCoy Global Raymond James Ltd - the analyst and/or associate has viewed the material operations of McCoy Global.
MEG Energy Corp. Raymond James Ltd. has provided non-investment banking securities-related services within the last 12 months with respect to MEG Energy Corp..
Raymond James Ltd. has received compensation for services other than investment banking within the last 12 months with respect to MEG Energy Corp..
Mullen Group Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Mullen Group Ltd..
Paramount Resources Ltd. Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Paramount Resources Ltd..
Pembina Pipeline Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Pembina Pipeline Corp..
Raymond James Ltd - within the last 12 months, Pembina Pipeline Corp. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.
Peyto Exploration and Development
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Peyto Exploration and Development.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Peyto Exploration and Development.
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Peyto Exploration and Development.
Precision Drilling Corporation Raymond James Ltd - the analyst and/or associate has viewed the material operations of Precision Drilling Corporation.
Savanna Energy Services Raymond James Ltd - the analyst and/or associate has viewed the material operations of Savanna Energy Services.
Secure Energy Services Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Secure
Energy Canada Research | Page 27 of 29
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Company Name Disclosure
Energy Services Inc..
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Secure Energy Services Inc..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Secure Energy Services Inc..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Secure Energy Services Inc..
Raymond James Ltd. makes a market in the securities of Secure Energy Services Inc..
Seven Generations Energy Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Seven Generations Energy Ltd..
Raymond James Ltd - within the last 12 months, Seven Generations Energy Ltd. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Seven Generations Energy Ltd..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Seven Generations Energy Ltd..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Seven Generations Energy Ltd..
Storm Resources Ltd. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Storm Resources Ltd..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Storm Resources Ltd..
Strad Energy Services Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Strad Energy Services Ltd..
Raymond James Ltd. makes a market in the securities of Strad Energy Services Ltd..
Suncor Energy Inc Raymond James Ltd - the analyst and/or associate has viewed the material operations of Suncor Energy Inc.
Tourmaline Oil Corp. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Tourmaline Oil Corp..
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Tourmaline Oil Corp..
Trican Well Service Raymond James Ltd - the analyst and/or associate has viewed the material operations of Trican Well Service.
Trinidad Drilling Ltd. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Trinidad Drilling Ltd..
Raymond James Ltd - within the last 12 months, Trinidad Drilling Ltd. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Trinidad Drilling Ltd..
Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Trinidad Drilling Ltd..
Western Energy Services Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Western Energy Services Corp..
STOCK CHARTS, TARGET PRICES, AND VALUATION METHODOLOGIES
Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences.
Canada Research | Page 28 of 29 Energy
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RISK FACTORS
General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation.
Risks - Energy 1. Commodity price Risk – Cash flows are directly or indirectly impacted by fluctuations in commodity prices and foreign exchange rates, most notably the Canadian-US dollar. 2. Operational Risk – Production from oil & gas properties could be impacted by unforeseen events - weather-related disruptions, downtime at processing facilities and unexpected pipeline breaks could all have an impact on a company’s financial and operating results. 3. Exploration and Development Risk – There is no guarantee that the exploration spending will result in economically viable discoveries; production and reserves can be materially impacted by lower than expected well productivity, weather conditions and construction delays could also impact production. Failure of development programs to deliver targeted reserves and production could also impact a company’s financial and operating results; this includes the potential for dry holes, unexpected production delays and higher than expected decline rates. 4. Regulatory Risks – The operations of an oil & gas company could also be materially impacted by regulatory changes; this includes but is not limited to changes in provincial royalty rates. 5. Environmental risks – Oil & gas companies are exposed to capital and operating costs associated with meeting environmental laws and regulations; this includes remediation expenditures; changes in the associated laws and/or regulations could have a material impact on a company’s financial and operating results. 6. Financial Risk – The oil & gas business is capital-intensive, which increases a company’s reliance on external sources of financing. Significant changes in the outlook for a company could impact its ability to fund capital program from cash flow and/or secure debt and/or equity financing. Lower cash flow could force a company to sell assets or reduce dividends if applicable to repay debt and other financial obligations. For companies with debt, a significant increase in interest rates could have a negative impact on cash flow. Oil & Gas companies are also exposed to potential changes in federal and provincial income taxes, which could have a material impact on cash flow. 7. Acquisitions – Some oil & gas companies have historically relied on acquisitions to maintain per unit production, reserves and dividends/distributions. Should the availability and quality of acquisitions be limited, the quality of the reserves and production of a trust may be negatively affected. This could have a negative impact on dividends/distributions if applicable to shareholders. 8. Political risk – International Oil & Gas companies may face inherent political risks when operating in unstable jurisdictions. Unexpected actions taken by such regimes or other recognized or non-recognized entities or parties could negatively affect the production, development, and/or operation of these companies.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available for Raymond James at rjcapitalmarkets.com/Disclosures/index and for Raymond James Limited at www.raymondjames.ca/researchdisclosures.
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