BIRCHCLIFF ENERGY $13.24 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 131.4 million; Market cap: $1.7 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 75% of Birchcliff’s production is natural gas. The remaining 25% is oil.
In the three months ended September 30, 2011, Birchcliff’s production jumped 34.6%, to 17,648 barrels of oil equivalent per day (including natural gas) from 13,109 barrels a year earlier.
Cash flow per share rose 50.0%, to $0.27 from $0.18. The production increase and higher oil prices were the main reasons for the gain.
The company’s exploration efforts continue to be successful, and its production keeps rising as it starts up the resulting new wells. As well, Birchcliff has completed phases I and II of its gas-plant expansion in Pouce Coupe, Alberta. That’s letting it bring the additional gas it is producing to market.
By November 2012, Birchcliff expects to finish phase III, which will double the plant’s capacity. That will let the company process the 28,000 barrels per day that it expects to produce by the end of 2012.
Birchcliff’s debt of $359.3 million is just 22.0% of its $1.7-billion market cap, so it can easily afford to borrow more to fund its expansion.
The shares jumped as high as $15.58 in October 2011 after Birchcliff announced that it had hired advisors to help sell the company after a number of parties expressed interest. While no offers have yet surfaced, potential buyers could include Asian investors. The shares have since moved down to today’s price.
The company expects to report cash flow of $1.25 a share in 2012. The shares trade at 10.6 times that estimate.
Birchcliff is still a buy for aggressive investors.
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