NGP: Key Catalysts that Could Move Stock

JOHN MCILVEEN, Jacob Securities, Inc. (01/13/2011)
"A look at some of the catalysts that could move the stock higher in 2011 after trading down 22% in 2010: 1) 50 MW Faulkner 1: Drilling in progress to replace three injection wells to optimize plant utilization to 45 MW net. Faulkner 1 at Blue Mountain should contribute annual EBITDA of $25M and FCF of $2M; 2.) 21 MW Faulkner 2: Feasibility study is planned for Faulkner 2; the three new injectors for Faulkner 1 would free up three production wells for Faulkner 2, wells for which are currently used as injectors for Faulkner 1. Faulkner 2 would add $5M in FCF and make NGP FCF positive by $3M; 3.) 30 MW Crump Geyser: Results from the drilling now in progress and a PPA expected in 2011. Commercial operation expected in 2013. Crump should contribute annual EBITDA of $17M and FCF of $7M and receive an ITC cash grant of $33M; 4.) 20 MW Pumpernickel: Site preparation for the first well is complete enabling drilling to commence in 2011. The drill rig from Blue Mountain will be moved to Pumpernickel at the end of March. Three development wells are permitted and ready to go. A JV partner is anticipated. Pumpernickel should contribute annual EBITDA of $11M and FCF of $4M and receive an ITC cash grant of $24M. Timing will be tight to meet the ITC cash grant online date of 2013; and 5.) The wild card: NGP may be able to monetize its depreciation tax shield at Faulkner 1 for ~$20M, which would allow paying down the TCW 14% coupon debt to $70M. . .and allow NGP to repatriate 40% of Faulkner 1 FCF to the corporate level."

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