Equity Research
BlackPearl Resources Inc.8
BUY
PXX-TSX
Last: Target:
October 7, 2016
2018e estimates highlight Onion Lake Phase II Thermal Project corporate finance gap
Rating
C$1.31 C$1.55 BUY
Prior Rating
BUY
Target
$1.55
Prior Target
$1.55
0% 18%
Concurrent with the introduction of our 2018e estimates across much of our Canadian E&P Intermediate/Mid/Small Cap space, we introduce a 2018e forecast, highlighted by a stay-flat premise in the absence of formal sanctioning of its Onion Lake Phase II Thermal Project (+6,000 bbl/d) and a not insignificant corporate finance gap in terms of project funding at current strip prices.
Dividend Yield Implied Total Return Share Data Shares dil., mm Mkt Cap, $mm EV, $mm
2017e 336 $440 $473
2018e 336 $440 $422
Our valuation and ranking remain unchanged. We continue to be constructive on the stock and look for paths to accelerate development of a sizeable resource position over the next 6 months to propel the stock higher.
Financial Data Gas, mmcf/d Liquids, bbl/d Total boe/d (6:1)
2017e 0.9 9,576 9,725
2018e 0.9 9,401 9,550
CFO, $mm Net Capex, $mm Net Debt, $mm
$63 $35 $33
$91 $40 ($18)
CFPS dil., $/shr EPS dil., $/shr
$0.19 $0.03
$0.27 $0.09
CNAV, $/shr RENAV, $/shr ENAV, $/shr
$2.00 $2.02 $3.14
Valuation EV/DACF EV per boe/d P/CNAV P/RENAV P/ENAV
2017e 7.3x $48,621 0.7x 0.6x 0.4x
2018e estimates illustrative of ~$50 mm of FCF generation on our current forecast. We do not observe sufficient financial liquidity to advance its $180 mm Onion Lake Phase II Project within our 2016e-2018e forecast period, though continue to view this as technically viable and ultimately tangible with a little more tenure. Unchanged 12-month target price of $1.55/share implies 5.5x 2018e EV/DACF (8.1x on the current strip). Alternatively, this equates to the average of our RENAVs (Atax, 7.5%) at our price forecast and the current strip accreted by 7.5% to frame a valuation a year out. This valuation should be reasonable within the context of historical levels. We continue to offer a BUY ranking and would invest in the stock with the market likely to recognize its slate of projects as technically viable and outperforming expectations ahead of its third quarter results in a month.
2018e 4.6x $44,141
All figures in C$ unless otherwise noted
Robert J. Fitzmartyn, P.Eng.
(403) 262-0648
[email protected]
Rachel C. Eddy, P.Eng.
(403) 262-0668
[email protected]
Prepared by GMP Securities L.P.
See important disclosures on the last two pages of this report
Equity Research Figure 1. Fin & Op BlackPearl Resources Inc. (PXX) Financial & Operating Information*
Our current 2018e estimates reflect free cash flow generation of ~$50 mm in 2018e absent of the initiation of a $180 mm Onion Lake Thermal Phase II build. We expect the company to finalize its decision in 1Q17e.
Our growth projections should be conservative in light of continuing to incorporate Onion Lake Phase I at or below nameplate despite strong performance thus far.
Commodity Prices WTI (NYMEX) Edmonton Light Henry Hub (NYMEX) AECO Spot USD/CAD Production Natural Gas Oil & Liquids Total - boe/d (6 mcf = 1 boe) % Natural Gas (6 mcf = 1 boe) Netbacks Natural Gas Realized Price Liquids Realized Price Equivalent Realized Price Royalties Production Costs Operating Netback Financials Cash Flow (CFO) CFPS - diluted EBITDAX EPS - diluted E&D Capex A&D Capex, Net Total Net Capex Total Net Capex/CFO Leverage Bank Debt + WC Deficiency Line of Credit (LOC) Bank Debt/LOC Net Debt Net Debt/CFO (trailing) Net Debt/CFO (forward) Capital Structure Basic Shares o/s @ YE Diluted Shares o/s @ YE Market Capitalization Enterprise Value (EV) Dividends & Sustainability Dividends Declared Dividend Yield Payout Ratio - diluted Cash Use/CFO (net of DRIP) Performance Prod. Per Shr Growth (Y/Y) - dil. PPS Growth (Y/Y) DDA - dil. CFPS Growth (Y/Y) - dil. CFPS Growth (Y/Y) DDA - dil. ROCE Net Asset Value CNAV (Atax, 10%) - diluted RENAV (Atax, 10%) - diluted ENAV (Atax, 10%) - diluted P/CNAV P/RENAV P/ENAV
1
2
2
Historical & GMP FirstEnergy Outlook 2016e
2017e
2018e
2015e
2016e
2017e
US$/bbl C$/bbl US$/mcf C$/mcf US$
$48.80 $58.38 $2.63 $2.70 0.784
$43.46 $53.00 $2.56 $2.09 0.763
$60.00 $64.09 $3.35 $3.12 0.857
$68.25 $71.01 $3.75 $3.45 0.890
$43.29 $53.70 $2.51 $2.08 0.758
$51.96 $64.86 $3.13 $2.90 0.760
$54.03 $65.36 $2.93 $2.96 0.762
mmcf/d bbl/d boe/d %
2.1 7,976 8,331 4%
0.8 9,592 9,725 1%
0.9 9,576 9,725 2%
0.9 9,401 9,550 2%
0.8 9,592 9,725 1%
0.9 9,576 9,725 2%
0.9 9,401 9,550 2%
$/mcf $/bbl $/boe $/boe $/boe $/boe
$2.72 $32.29 $31.58 $5.27 $19.50 $6.82
$1.98 $28.44 $28.23 $3.52 $14.90 $9.81
$3.04 $42.97 $42.61 $5.33 $15.55 $21.74
$3.37 $49.14 $48.71 $6.09 $14.07 $28.55
$1.97 $28.75 $28.54 $3.56 $14.90 $10.07
$2.83 $37.38 $37.07 $4.64 $15.55 $16.89
$2.88 $40.72 $40.36 $5.05 $14.07 $21.24
$mm $/shr $mm $/shr $mm $mm $mm x
$49 $0.15 $50 ($0.14) $69 $0 $69 1.4x
$35 $0.10 $38 ($0.07) $8 $0 $8 0.2x
$63 $0.19 $65 $0.03 $35 $0 $35 0.6x
$91 $0.27 $92 $0.09 $40 $0 $40 0.4x
$36 $0.11 $39 ($0.06) $8 $0 $8 0.2x
$51 $0.15 $53 $0.00 $35 $0 $35 0.7x
$66 $0.20 $66 $0.03 $40 $0 $40 0.6x
$mm $mm x $mm x x
$87 $150 0.6x $87 1.8x 2.5x
$61 $118 0.5x $61 1.8x 1.0x
$33 $118 0.3x $33 0.5x
($18) $118 -0.2x ($18) -0.2x
$60 $118 0.5x $60 1.7x 1.2x
$45 $118 0.4x $45 0.9x
$19 $118 0.2x $19 0.3x
mm mm $mm $mm
336 336 $258 $345
336 336 $440 $501
336 336 $440 $473
336 336 $440 $422
336 336 $440 $500
336 336 $440 $484
336 336 $440 $459
$mm $/shr % % %
$0 $0.00 0.0% 0% 140%
$0 $0.00 0.0% 0% 23%
$0 $0.00 0.0% 0% 55%
$0 $0.00 0.0% 0% 44%
$0 $0.00 0.0% 0% 22%
$0 $0.00 0.0% 0% 69%
$0 $0.00 0.0% 0% 61%
% % % % %
-12% -35% -46% -60% -6%
16% 21% -29% -27% -3%
0% 8% 81% 95% 2%
-2% 6% 45% 56% 5%
16% 21% -28% -25% -3%
0% 7% 42% 52% 0%
-2% 1% 30% 34% 2%
$/shr $/shr $/shr x x x
$2.00 $2.02 $3.14 0.4x 0.4x 0.2x 2015 $0.77 6.9x 12.1x 6.8x $41,461 5.2x -5.5x
$2.00 $2.02 $3.14 0.7x 0.6x 0.4x 2016e $1.31 13.1x 15.2x 13.1x $51,517 12.6x -19.7x
2018e $1.31 4.6x 5.5x 4.6x $44,141 4.8x 14.8x
$1.09 $0.96 $0.96 1.2x 1.4x 1.4x 2016e $1.31 12.8x 14.9x 12.8x $51,432 12.3x -20.4x
2017e $1.31 9.2x 10.7x 9.2x $49,813 8.7x 2417.3x
2018e $1.31 6.9x 8.1x 6.9x $48,029 6.7x 38.3x
3
Valuation Share Price, YE/Current EV/DACF Target EV/DACF EV/EBITDAX EV per boe/d P/CF P/E
@ Futures Strip**
2015
1
$/shr x x x $/boepd x x
2017e $1.31 7.3x 8.5x 7.3x $48,621 7.0x 48.5x
* C$ before royalties unless otherwise noted; 1) EBITDAX = Pre-Int. & Pre-Tax Cash Flow; 2) DDA = Debt-and-Dividend-Adjusted 3) CNAV incl. 2P reserves, RENAV incl. 2P reserves + Risked LT inventory upside, ENAV incl. 2P reserves + Unrisked LT inventory upside Source: GMP FirstEnergy, Company Disclosures **Futures strip as of 4-Oct-16
2
Equity Research Corporate finance gap of $100-$150 mm not insurmountable BlackPearl will continue to monitor market conditions and evaluate alternatives to finance both its Onion Lake Phase II Thermal Project (+6,000 bbl/d), an expansion of the existing successful Phase I SAGD build producing 6,400 bbl/d (above its 6,000 bbl/d nameplate) with an iSOR and cSOR of 2.6x and 3.9x, respectively. We offer an FCF view at a couple price projections to illustrate the underlying cash generation of the company as it stands today, with the bulk of capital expenditures associated with Onion Lake Thermal maintenance capex at ~$5/bbl. With 2014 and 2015 behind us, characterized by PPS DDA (Production growth Per diluted Share, Dividend Debt Adjusted) of -26% and -17%, respectively, BlackPearl will reverse this course with +21%, +8%, +6% in 2016e-2018e. The base FCF view is reflective ultimately of +21% in later years. At the current strip, these growth rates are effectively half with debt repayment deferred. We continue to exclude Onion Lake Thermal Phase III (+6,000 bbl/d, a recent advent to its potential project inventory in the last 6 months) and Blackrod (+80,000 bbl/d potential, to be phased beginning with +20,000 bbl/d), within our forecasts to 2018e (and beyond to 2020e) though continue to illustrate potential upside of the first phase of Blackrod within our NAV methodology. We continue to offer a 12-month target price of $1.55/share in the absence of no real changes to our view. Alleviation of its corporate finance gap and acceleration of its development projects should support further valuation uplifts. We continue to rank the stock as a BUY. Risks to our valuation and ranking include volatility of crude oil and natural gas prices, particularly non-upgraded heavy oil, political interference and general rent-seeking, environmental fanaticism and technological advances in the energy space with special regard to alternative energy.
3
Equity Research Figure 2. PXX Cumulative Free CashFlow: GMP FirstEnergy Pricing PXX Cumulative Free Cash Flow: GMP FirstEnergy Pricing (October 2016)
$250
Phase I & II ($mm)
$200
Free Cash Flow ($ mm)
$150 $100 $50 $0 -$50 -$100 -$150
Source: GMP FirstEnergy Capital Corp; Company Reports
Figure 3. PXX Cumulative Free Cash Flow: Current Strip Pricing PXX Cumulative Free Cash Flow: Current Strip Pricing (October 2016)
$250
Phase I ($mm)
$200
$150 Free Cash Flow ($ mm)
Peak net debt levels at strip on a Phase II build are ~$215 mm in 2Q18e, framed within an existing $117.5 mm LOC. While our crude oil outlook remains robust, particularly post the onset of first oil of a notional Phase II in late 2018e or early 2019e, practically the best way to invest in a bullish oil outlook is through a BlackPearl equity issue from treasury. 2020e CFPS would be ~56% higher (no dilution) with the contribution of Phase II if it could bridge the gap.
Phase I ($mm)
$100 $50 $0 -$50 -$100 -$150
Source: GMP FirstEnergy Capital Corp; Company Reports
4
Phase I & II ($mm)
Equity Research Figure 4. NAV Recoverable Resource BlackPearl Resources Inc. NAV Table - Base Case FirstEnergy Price Forecast Base Business Core PDP Reserves (excluding Onion Lake Phase I) Core 1P Additions (excluding Onion Lake Phase I) Core 2P Additions (excluding Onion Lake Phase I, II & Blackrod Phase I) Onion Lake Phase I & Phase II Blackrod Phase I Total
Unrisked
mmbbl
bcf
mmboe
Atax NPV10 ($ mm)
6 8 14 85 180 293
0 0 0 0 0 0
6 8 14 85 180 293
$76 $35 $90 $561 $139 $901
Land & Seismic Net Financial Assets Proceeds on Dilutive Securities
NPV per Share (diluted)
Risk
mmbbl
bcf
$12.91 $4.32 $6.43 $6.59 $0.77 $3.07
$0.23 $0.10 $0.27 $1.67 $0.41 $2.68
100% 100% 100% 100% 0% 39%
6 8 14 85 0 113
0 0 0 0 0 0
$44 -$134 $0
Shares Outstanding - diluted (mm)
Recoverable Resource
Atax NPV10 ($/boe)
mmboe
Atax NPV10 ($/boe)
NPV per Share (diluted)
6 8 14 85 0 113
$76 $35 $90 $561 $0 $762
$12.91 $4.32 $6.43 $6.59 $0.00 $6.74
$0.23 $0.10 $0.27 $1.67 $0.00 $2.27
$0.13 -$0.40 $0.00
$44 -$134 $0
335.6 Total Core NAV
Risked Atax NPV10 ($ mm)
$0.13 -$0.40 $0.00
335.6
293
0
293
$810
$2.76
$2.41
39%
113
0
113
$671
$5.94
$2.00
Unbooked Inventory (5 Year Development) Onion Lake Cummings/Dina - Primary Onion Lake SAGD Blackrod SAGD Phase II Blackrod SAGD Phase III Total Unbooked 5-Year Development
2 26 0 0 28
0 0 0 0 0
2 26 0 0 28
$20 $161 $0 $0 $181
$11.41 $6.09 $0.00 $0.00 $6.41
$0.06 $0.48 $0.00 $0.00 $0.54
75% 50% 0% 0% 52%
1 13 0 0 15
0 0 0 0 0
1 13 0 0 15
$0 $81 $0 $0 $81
$11.41 $6.09 $0.00 $0.00 $5.55
$0.00 $0.24 $0.00 $0.00 $0.24
Unbooked Inventory (Long-Term) Onion Lake Cummings/Dina - Primary Onion Lake SAGD Blackrod SAGD Phase II Blackrod SAGD Phase III Total Long-Term Inventory
0 0 214 195 409
0 0 0 0 0
0 0 214 195 409
$0 $0 $100 $63 $162
$0.00 $0.00 $0.47 $0.32 $0.40
$0.00 $0.00 $0.30 $0.19 $0.48
0% 0% 0% 0% 0%
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
$0 $0 $0 $0 $0
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
External Financing & Other Charges ($ mm)
-$55 335.6
Shares Outstanding - diluted (mm) Total ENAV/RENAV
731
0
731
$1,054
-$0.16 $1.44
$3.14
-$28 335.6 0.2
128
0
128
$679
-$0.08 $5.33
$2.02
Source: GMP FirstEnergy, Company Disclosures
Recoverable Resource BlackPearl Resources Inc. NAV Table - Base Case Current Forward Strip - 10/4/16 Base Business Core PDP Reserves (excluding Onion Lake Phase I) Core 1P Additions (excluding Onion Lake Phase I) Core 2P Additions (excluding Onion Lake Phase I, II & Blackrod Phase I) Onion Lake Phase I & Phase II Blackrod Phase I Total
Unrisked
mmbbl
bcf
mmboe
Atax NPV10 ($ mm)
6 8 14 85 180 293
0 0 0 0 0 0
6 8 14 85 180 293
$46 -$5 $35 $378 -$15 $440
Land & Seismic Net Financial Assets Proceeds on Dilutive Securities
NPV per Share (diluted)
Risk
mmbbl
bcf
$7.90 -$0.62 $2.53 $4.44 -$0.08 $1.50
$0.14 -$0.01 $0.11 $1.13 -$0.05 $1.31
100% 100% 100% 100% 0% 39%
6 8 14 85 0 113
0 0 0 0 0 0
$44 -$134 $0
Shares Outstanding - diluted (mm)
Recoverable Resource
Atax NPV10 ($/boe)
mmboe
Atax NPV10 ($/boe)
NPV per Share (diluted)
6 8 14 85 0 113
$46 -$5 $35 $378 $0 $455
$7.90 -$0.62 $2.53 $4.44 $0.00 $4.02
$0.14 -$0.01 $0.11 $1.13 $0.00 $1.35
$0.13 -$0.40 $0.00
$44 -$134 $0
335.6 Total Core NAV
Risked Atax NPV10 ($ mm)
$0.13 -$0.40 $0.00
335.6
293
0
293
$349
$1.19
$1.04
39%
113
0
113
$364
$3.22
$1.09
Unbooked Inventory (5 Year Development) Onion Lake Cummings/Dina - Primary Onion Lake SAGD Blackrod SAGD Phase II Blackrod SAGD Phase III Total Unbooked 5-Year Development
2 26 0 0 28
0 0 0 0 0
2 26 0 0 28
$12 $60 $0 $0 $72
$7.01 $2.26 $0.00 $0.00 $2.55
$0.04 $0.18 $0.00 $0.00 $0.21
75% 50% 0% 0% 52%
1 13 0 0 15
0 0 0 0 0
1 13 0 0 15
$0 $30 $0 $0 $30
$7.01 $2.26 $0.00 $0.00 $2.06
$0.00 $0.09 $0.00 $0.00 $0.09
Unbooked Inventory (Long-Term) Onion Lake Cummings/Dina - Primary Onion Lake SAGD Blackrod SAGD Phase II Blackrod SAGD Phase III Total Long-Term Inventory
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
$0 $0 $0 $0 $0
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
0% 0% 0% 0% 0%
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
$0 $0 $0 $0 $0
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
External Financing & Other Charges ($ mm)
-$55 335.6
Shares Outstanding - diluted (mm) Total ENAV/RENAV
322
0
322
$322
Source: GMP FirstEnergy, Company Disclosures
5
-$0.16 $1.00
$0.96
-$28 335.6 40%
128
0
128
$322
-$0.08 $2.52
$0.96
Equity Research Figure 5. Quarterly table Quarterly Info^
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16e
4Q16e
1Q17e
2Q17e
3Q17e
4Q17e
1Q18e
2Q18e
3Q18e
4Q18e
Gas, mmcf/d Liquids, bbl/d Total, boe/d CFO, $mm CFPS dil., $/shr E&D Capex, $mm A&D Net, $mm Net Capex, $mm Bank Debt & WCD* Net Debt, $mm
2.3 7,885 8,269 $13 $0.04 $43 $0 $43 $97 $97
3.0 7,550 8,051 $15 $0.04 $16 $0 $16 $99 $99
2.2 7,115 7,478 $10 $0.03 $8 $0 $8 $97 $97
1.0 9,347 9,521 $11 $0.03 $2 $0 $2 $87 $87
0.8 9,006 9,147 $4 $0.01 $2 $0 $2 $85 $85
0.8 9,557 9,698 $11 $0.03 $1 $0 $1 $76 $76
0.7 10,075 10,199 $9 $0.03 $3 $0 $3 $70 $70
0.7 9,725 9,849 $11 $0.03 $3 $0 $3 $61 $61
0.9 9,725 9,874 $12 $0.04 $5 $0 $5 $54 $54
0.9 9,125 9,274 $14 $0.04 $0 $0 $0 $40 $40
0.9 9,725 9,874 $19 $0.06 $15 $0 $15 $36 $36
0.9 9,725 9,874 $18 $0.05 $15 $0 $15 $33 $33
0.9 9,550 9,699 $19 $0.06 $15 $0 $15 $29 $29
0.9 8,950 9,099 $20 $0.06 $5 $0 $5 $14 $14
0.9 9,550 9,699 $26 $0.08 $10 $0 $10 ($2) ($2)
0.9 9,550 9,699 $26 $0.08 $10 $0 $10 ($18) ($18)
Source: GMP FirstEnergy, Company Disclosures
*Bank Debt & Working Capital Deficit, $mm
^For annual estimates see the FinOp table on page 2
Figure 6. Sensitivity table Commodity Price Scenarios*
Low Deck 2017e 2018e
Mid-Low Deck 2017e 2018e
Mid-High Deck 2017e 2018e
High Deck 2017e 2018e
US$/bbl US$/mcf US$ C$/bbl C$/mcf
30.00 1.75 0.700 37.02 1.71
30.00 1.75 0.700 37.24 1.74
40.00 2.25 0.750 47.50 2.21
40.00 2.25 0.750 47.71 2.24
50.00 2.75 0.800 56.66 2.65
50.00 2.75 0.800 56.88 2.68
60.00 3.25 0.850 64.75 3.04
60.00 3.25 0.850 64.97 3.06
boe/d $/boe $mm $/shr $mm $mm $mm $mm x
9,725 (1.72) 0 0.00 2 35 15583% 108 479.2
9,550 (0.71) (11) (0.03) (10) 40 -365% 159 (14.5)
9,725 7.34 25 0.07 27 35 141% 76 3.1
9,550 8.36 21 0.06 21 40 193% 96 4.6
9,725 15.27 46 0.14 48 35 76% 49 1.1
9,550 16.29 48 0.14 49 40 83% 41 0.8
9,725 22.27 65 0.19 67 35 54% 25 0.4
9,550 23.28 73 0.22 74 40 55% (8) (0.1)
x x
246.6 282.9
(57.9) (65.7)
19.2 22.3
25.1 28.9
10.1 11.8
9.8 11.4
6.9 8.1
5.9 7.0
C$, before royalties, unless noted Commodity Prices WTI (NYMEX) Henry Hub (NYMEX) USD/CAD Edmonton Light AECO Spot Key Financial & Operating Information Total Production (6 mcf: 1 boe) Operating Netback Cash Flow (CFO) CFPS, dil. EBITDAX Net Capex 1 Cash Use/Cash Flow Net Debt Net Debt/Cash Flow (Trailing) DACF Multiple 2 EV/DACF 2 Target EV/DACF
1) 'Cash Use' Net of any DRIP; 2) Current Share Price at 5-Oct: $1.31; Target Price: $1.55; * Go-forward price decks for WTI, FX, and Henry Hub for the current year are equal to the price deck shown for Year 2 See page 2 for metrics at GMP FirstEnergy's price deck and the Futures strip Source: GMP FirstEnergy, Company Disclosures
6
Equity Research Disclosures GMP FirstEnergy is a trade name and division of GMP Securities L.P. (“GMP Securities”), and a trade name of FirstEnergy Capital (USA) Corp. (“FirstEnergy USA”) and FirstEnergy Capital LLP (together with FirstEnergy USA “FirstEnergy”, and collectively with GMP Securities “GMP/FirstEnergy”). The information contained in this report is drawn from sources believed to be reliable but the accuracy or completeness of the information is not guaranteed, nor in providing it do GMP/FirstEnergy assume any responsibility or liability whatsoever. Information on which this report is based is available upon request. This report is not to be construed as a solicitation of an offer to buy or sell any securities. GMP/FirstEnergy and/or affiliated companies or persons may as principal or agent, buy and sell securities mentioned herein, including options, futures or other derivative instruments thereon. Company-Specific Disclosures: 1 GMP/FirstEnergy and/or any of its group affiliated companies has within the previous 12 months, provided paid investment banking services or acted as underwriter to the issuer. 2 As of the date of this report, the firm may make a market and / or trades in some or all of the equity, fixed income and convertible securities (if any) of the issuer. The firm reserves the right to stop, or start, making markets in any securities (including, without limitation, securities subject of this report), at any time, without notice. 3 GMP/FirstEnergy and/or any of its group affiliated companies owns 1% or more of this issuer’s securities. 4 RESERVED 5 The analyst is related to an officer, director or advisory board member of the issuer, but that individual has no influence in the preparation of this report. 6 The analyst has visited the operations of this issuer. The issuer and/or GMP/FirstEnergy clients paid all or a portion of the travel expenses associated with the analyst’s site visit to its operations. 7 The analyst who prepared this report has viewed the operations of the issuer. 8 The analyst and/or a member of their household have a position in this issuer's securities: Fitzmartyn, Long Common Analyst Certification: Each research analyst and associate research analyst who authored this document and whose name appears on the first page herein certifies that: the recommendations and opinions and expressed in the research report accurately reflect their personal views about any and all of the securities or issuers discussed herein that are within their coverage universe and no part of the compensation was, is, or will be, directly or indirectly, related to the provisions of specific recommendations or views expressed herein. GMP/FirstEnergy and / or its affiliates have not received compensation from the subject company of this report, or persons known by this firm to be affiliates of the subject, in the prior twelve months for the performance of services. Neither the authoring analyst, nor any supervisory or executive person with the ability to influence the content of this report, nor any member or principal officer of the firm, nor any of their respective households or immediate families, has received compensation or has any material conflict of interest from the subject of this report in the prior twelve months. GMP/FirstEnergy and / or its affiliates expect to receive or intend to seek compensation for investment banking services within the next three months from the subject company of this report. GMP/FirstEnergy Analysts are compensated on several criteria including individual performance (e.g. productivity, research quality and market impact) and the overall financial performance of GMP/FirstEnergy’s energy business, including overall revenues from investment banking activities. FirstEnergy USA observes, as applicable, the equity research rules of the Financial Industry Regulatory Authority, and the Securities Exchange Commission and all relevant disclosures required by these regulatory rules. GMP/FirstEnergy observes, as applicable, the equity research rules of The Investment Industry Regulatory Organization of Canada and the Ontario Securities Commission and all relevant disclosures required by these regulatory rules. GMP/FirstEnergy’s recommendation statistics and research dissemination policies can be obtained at www.gmpsecurities.com or by calling GMP Securities’ Compliance Department. Valuation Method / Risks: The valuation method used to determine the price target for the issuer(s) mentioned in this report and the risks that may impede achievement of the price target can be found on the body of this research report under Valuation Method/Risk Section.
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Equity Research The GMP/FirstEnergy research recommendation structure consists of the following ratings: Buy: A Buy rating reflects 1) bullish conviction on the part of the analyst; and 2) typically a 15% or greater return to target. Speculative Buy: A Speculative Buy rating reflects 1) bullish conviction on the part of the analyst accompanied by a substantially higher than normal risk, including the possibility of a binary outcome; and 2) typically a 30% or greater return to target. Hold: A Hold rating reflects 1) a lack of bullish or bearish conviction on the part of the analyst; and 2) typically a return of 0 to 20%. Reduce: A Reduce rating reflects 1) bearish conviction on the part of the analyst; and 2) typically a 5% or lower return to target. Tender: Clients are advised to tender their shares to a takeover bid or similar offer. Percentage of Securities Covered by the Firm Receiving this Recommendation:
Percentage
% Investment Banking Clients within the Previous 12 Months
Buy
55%
26%
Hold
26%
7%
Reduce
4%
0%
Speculative Buy
0%
0%
Tender
1%
0%
Under Review
14%
8%
Rating
Rating System Prior to October 1, 2016 FirstEnergy’s rating system reflects our outlook for expected performance of an issuer’s equity securities relative to its peer group over the next 12 months. A Top Pick (Buy) rating represents a security expected to provide a return materially higher than the peer group average. An Outperform (Buy) rating represents a security expected to provide a return greater than the peer group average. A Market Perform (Hold) rating represents a security expected to provide a return in line with the peer group average. An Underperform (Sell) rating represents a security expected to provide a return less than the peer group average. A Speculative Buy (Buy) rating represents a security where the return potential is high, but the risk of a significant loss is material. A Tender (X) represents a security where investors are guided to tender to the terms of the takeover offer.
BlackPearl Resources Inc. (TSX: PXX) Ranking and Target Price Changes $6.00 Closing Price
Ranking Change
Target Price Change
$5.00 Mar-21-14 (O)
Post October 1, 2016 The GMP FirstEnergy research recommendation structure consists of the following ratings: Buy: A Buy rating reflects 1) bullish conviction on the part of the analyst; and 2) typically a 15% or greater return to target. Hold: A Hold rating reflects 1) a lack of bullish or bearish conviction on the part of the analyst; and 2) typically a return of 0 to 20%. Reduce: A Reduce rating reflects 1) bearish conviction on the part of the analyst; and 2) typically a 5% or lower return to target. Speculative Buy: A Speculative Buy rating reflects 1) bullish conviction on the part of the analyst accompanied by a substantially higher than normal risk, including the possibility of a binary outcome; and 2) typically a 30% or greater return to target. Tender: Clients are advised to tender their shares to a takeover bid or similar offer.
Closing Price
$4.00 Jul-12-13 (O)
$3.00 Feb-26-16 (O)
$2.00 Mar-03-14 (*)
Jun-07-13 (R)
$1.00
Jul-16
Oct-16
Jan-16
Apr-16
Jul-15
Jan-15
Apr-15
Jul-14
Oct-14
Jan-14
Apr-14
Jul-13
Oct-13
Jan-13
Apr-13
Oct-15
Feb-05-16 (SB)
$0.00
Source: GMP FirstEnergy, Bloomberg Ratings prior to Oct 1, 2016: T = Top Pick (Buy); O = Outperform (Buy); M = Market Perform (Hold); U = Underperform (Sell); SB = Speculative Buy (Buy); R = Under Review; * = Restricted; As of April 15, 2009 X = Tender; NR = Not Rated Ratings post Oct 1, 2016: Buy (A), Hold (B), Reduce (C), Speculative Buy (D), Tender (E)
GMP Securities L.P. is a member of IIROC and a participant of the TSX, TSX Venture and the Montreal Exchange. 145 King Street West, Suite 300 Toronto, Ontario M5H 1J8 Tel: (416) 367-8600 Fax: (416) 943-6134. FirstEnergy Capital (USA) Corp. is a member of the Financial Industry Regulatory Authority, and operates as a Broker-Dealer in the United States. UK and Europe: This material is distributed by FirstEnergy Capital LLP to persons who are eligible counterparties or professional clients. FirstEnergy Capital LLP is authorised and regulated by the Financial Conduct Authority. 85 London Wall, London, EC2M 7AD Tel: +44 (0)20 7448 0200 © GMP FirstEnergy. All rights reserved. Reproduction in whole or in part without permission is prohibited.
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