Professional Documents
Culture Documents
Greg Imbruce
Power
IPPs Electric & Gas Utilities
Real NatGas price peaked in mid-February 2003 at $20.15, while bottoming in December 1998 at $1.19 Since 1991, Real NatGas price averaged $3.31
Nominal vs. Real NatGas Px (Today's Dollars)
Nominal NatGas Px
$10
Real NatGas Px
$8
$/Mcf
$6
$4
$2
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00
01
02
03
04
$60
$50
$40
$/Bbl
$30 $20 $10
83 83 84 84 85 85 86 86 87 87 88 88 89 89 90 90 91 91 92 92 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04
LOE Prod. Taxes LOE + Taxes G&A Operating Costs Cash Int. Exp. Total Cash Costs Avg. Differential NYMEX Breakeven Avg. FD&A All-In NYMEX Breakeven
Independent E&Ps become the major NA player, driving breakeven higher and supporting long-term $30/Bbl and $4/Mcf as capacity remains tight
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Company SWAPS: Out of: Calpine Corp. Into: Tiverton/Rumford Power (Calpine) or Into: Calpine Corp. or Into: Calpine Corp. SELLS: Abraxas Petroleum Magnum Hunter Newpark Resources
Bond Description
Ratings
Price
YTW
STW
Duration
8.5 Sr. Nts. 11 9 Pass Thru Certs. 18 7.82 Sr. Sec. Nts.-2nd Lien 07 8.5 Sr. Nts. 08 9.72 Sr. Sec. Nts.-1st Lien 09 9.6 Sr. Nts. 12 8.625 Sr. Sub. Nts. 07
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Restructuring Finalized KPMG as Provisional Liquidator recently announced a restructuring plan that will provide USD & NOK Sr. Noteholders ($163 MM) 98% of NEWCOs equity and existing shareholders 2%. USD Noteholders (10s) will receive $14 MM cash payment for the cancellation of a guarantee. We view NOF as excellent platform for growth that is debt-free with $14 MM in cash Creating company at 6x LTM EBITDA ($24 MM) and 3.7x 05E ($40 MM) EBITDA vs. 1015x EBITDA for comparables Strengthening dayrates support business for the Energy Search (Drillship), Northern Producer (Floating Production Platform), and Galaxy Driller (cold stacked) Immediate Catalyst - Expect Talisman Energy (TLM) to extend N. Producer contract (expired 1/6/05 and continues to operate) at $115k dayrate with 2 to 3-year term and generate approximately $25 mm in annual EBITDA
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TIVERTON
STRONG BUY: $363 MM 9% Pass Thru Cert. 18 Calpine Project Debt 2 NatGas Northeast Generating Plants
SLOB - 1st Lien Position on Two Northeast generation assets and Corp. Lease
Guarantee
Quality Generation Assets Total 491 MWs Both baseload NatGas plants with
7,000 heat rate:
TIVERTON - Tiverton, Rhode Island (240 MW); RUMFORD - Rumford, Maine (251 MW)
Self-Amortizing 4-year duration, 5-year avg. life Attractive Yield/Spread 13.7%, +992 bps avg. life spread 11.5% yield in worst-case-scenario in which CPN files BK in 2008 Tiverton and Rumford operated at 80% and 70% Capacity Factors in 2003, respectively
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Immediate Catalyst 2/1/05 Maturity Update Pension Settled for $45 mm vs $66 mm estimate and Pasadena Sold for $42 mm, in line with our estimate Remaining Assets - Tyler refinery and crude oil and products in inventory We expect partial refinancing of the Sr. Notes and/or Crude Oil Processing Agmt. Creating the refining assets at attractive valuation ($33/Complexity Bbl and 2.1x 04E EBITDA) Free Cash Flow $17 mm 2H04E FCF
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Seitel Inc. (SELA) STRONG BUY: $193MM 11.75% Sr. Notes 11 US Land Seismic Processor
Relative Yield Play Non-Call, 10.2% +630 bps that could go to 130 if SELA were acquired by large oil service entity Tax Refund - Received $11 mm Tax Refund in 4Q04, boosting cash to $29 MM and total liquidity to over $61 MM Strong Covenants 50% FCF cash flow sweep at Noteholders option, $65 mm CapEx restriction Healthy Financial Results: $87 MM LTM Cash EBITDA Excellent Credit Statistics:
1.5x Net Debt Leverage 3.8x Interest Coverage (Normalized to acct. for higher 3Q04 Interest Expense due to BK)
Increasing E&P Budgets Expect +15-20% YoY CapEx to benefit SELA in 2005
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APPENDIX
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2,000
1,500
1,000
500
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98 Oil
99
Gas
00
Miscellaneous
01
02
03
04
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2,900
2,400
1,900
1,400
900
2000 2001 2002 2003 2004 5-Yr Avg. thru 2003
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The Disconnect
Record Oil & Gas Prices, yet metrics point to declining US exploration activity: Seismic Crews plummeted to 481 in 2003, -29% YoY, -33% vs. 2001 and the lowest since the statistic began being recorded in 1977 Wildcats wells are 22% from 2001 and -54% from 1990
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US Offshore Drilling
Offshore Rig count is -7% from last year and -46% from the 181 Offshore Rig peak in January 2001, however, we are beginning to witness an reversal, highlighted by significantly higher dayrates.
200 180 160 140 120 100 80 60 40 20
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Peak Year Milestones all occurred in the early 1980s except for demand-side data, which we saw peak in 2002
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MBOEPD
15
10
76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
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Capacity to Expand
HY E&Ps Positioned for Value Creation - M&A and Drilling: $7.3 in Total Liquidity: Cash $1.2 B + $6.1 B Available EBITDA: $3.0 B Recent Quarter LTM EBITDA topped a record $10.2 B Healthy Credit Statistics provide asset expansion: 2.4x Total Debt Leverage / 10.2x Cash Interest Coverage 45% Total Debt/Book Cap
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1993
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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
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Nationwide Crack Spreads appear to have bottomed in 2002. Talk of first new refinery since 1976, planned to be completed by 2009 in Arizona, accessing California market
Cumulative NYMEX 3-2-1 Crack Spreads
$35
$30
$25
$/Bbl
$20
$15
$10
$5
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
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2004 Jefferies & Company, Inc. All rights reserved. I, Greg Imbruce, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. In December 2004, Jefferies acted as co-manager in a secondary offering of equity for Range Resources. In June 2004, Jefferies acted as co-manager in a secondary offering of equity for Range Resources. In June 2004, Jefferies acted as co-manager of a secondary offering of common stock for Magnum Hunter. In June 2004, Jefferies acted as co-manager of a senior unsecured notes offering for Swift Energy. In December 2003, Jefferies acted as placement agent in an offering of Senior Unsecured Notes for Callon Petroleum. Concluding in August 2004, Jefferies acted as financial advisor to Seitel, Inc. in its Chapter 11 bankruptcy proceedings, lead manager of a rights offering and co-manager of a high yield offering. Jefferies or one or more of its affiliates makes a market or acts as a specialist in the equity of Mission Resources Corp., Seitel Inc. & Calpine Corp. This material has been prepared by Jefferies & Company, Inc. ("Jefferies") a U.S.-registered broker-dealer, employing appropriate expertise, and in the belief that it is fair and not misleading. It is approved for distribution in the United Kingdom by Jefferies International Limited ("JIL") regulated by the Financial Services Authority ("FSA"). The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore except for any obligations under the rules of the FSA, we do not guarantee its accuracy. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimates constitute our best judgment as of this date, and are subject to change without notice. Jefferies and JIL and their affiliates and their respective directors, officers and employees may buy or sell securities mentioned herein as agent or principal for their own account. This material is intended for use only by professional or institutional investors falling within articles 19 or 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001and not the general investing public. None of the investments or investment services mentioned or described herein are available to other persons in the U.K. and in particular are not available to "private customers" as defined by the rules of the FSA or to anyone in Canada who is not a "Designated Institution" as defined by the Securities Act (Ontario)."
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