CEN.V I started loading up on CEN.V, Coastal Energy the last few days. Probably one of the best values amongst mid sized independents. Depending on result of 9 development wells this summer, 2010 exit rate could be 15k-20k bopd with no debt and market cap right now at just below USD 400m! It has been decimated due to overblown political fears regarding Thailand, where they operate.
'We have management of Coastal Energy available for one-on-one marketing meetings on Tuesday June 22nd. Please let me know if you would like a meeting.
Coastal Energy (CEN-TSX, $3.49). $367M Market Cap. Buy/$7.50 Target
While perceived political risk and exploration disappointment certainly put a damper on share price momentum, we believe the underlying story not only remains intact, but is getting stronger,
and should be a catalyst for better share-price performance in the near future. Six main points that we wish to highlight on Coastal are:
1. Net asset value: The Company’s 2P net asset value remains intact, which was C$6.93/sh at
year end on a PV10% after-tax basis.
2. Growth: Q1 FY10 production was a new quarterly high, and we expect to see double-digit
sequential growth for the remaining 3 quarters of the year.
3. Balance sheet: Debt to cash flow is 0.5x on the current quarter annualized, and should be
eliminated by early next year.
4. Exploration upside: We still see significant upside from exploration.
5. Risk: We see the risk profile decreasing on both the political and operational fronts.
6. Valuation: Compelling valuation as Coastal currently trades at 1.9x cash flow and at 2.0x
EV/EBITDA on 2010 consensus estimates, well below the average peer cash-flow multiple of
5.7x and EV/EBITDA multiple of 4.4x.'
AI
