MEI:TSX.V

Manitok Energy Inc.

Manitok Energy Inc. is a public oil and gas exploration and development company focused on conventional oil and gas reservoirs in the Canadian foothills and southeast Alberta. The corporation will utilize its experience and expertise to develop the untapped conventional oil and liquids-rich natural gas pools in both the foothills and southeast Alberta areas of the Western Canadian Sedimentary Basin.

Expert Comments:

"Our favorite at the moment continues to be Manitok Energy Inc. (MEI:TSX), a 5,000 5 Mbbl/d producer with all its assets in Alberta. The company is one of the cheapest we can find in the space. It's trading at about two times EV:EBITDA versus the group, which is trading at about seven times EV:EBITDA. We believe the company has a long runway of growth ahead because it has established a foothold in an area of Alberta called Entice, which it bought from Encana Corp. Some initial results have been excellent. . .the company was a CA$3/share stock last fall, but pressure from falling energy prices and tie-in deliverable issues at both Stolberg, its original core area, and Entice, have held the stock down. One tie-in issue was related to Husky Energy facilities that Manitok delivers into, and the other was related to similar Encana facilities, where the condensate content overwhelmed the facility. The company has made discoveries, but the market doesn't like a company that has production glitches. I think the market is being myopic, and production should be in line in a month or so. The market is also concerned about the higher royalty rates Manitok pays PrairieSky Royalty for the Entice production, and the capital spending obligations it has this year and next. But PrairieSky is aware of this issue and, hopefully, there can be a meeting of the minds to alleviate any concern.

With the Canadian dollar having gone from par to about CA$1.22 now on the U.S. dollar, the value of Manitok today is in the CA$2.50/share range, but could easily rise to CA$4/share or substantially higher with higher oil prices. As drilling at Entice continues, production and reserve additions should rise significantly over the next couple of years, offering compelling upside potential. . .to date, Manitok has been using the Cenovus Energy Inc. analog, which is about 25 kilometers away, meaning Cenovus wells that look similar to the Entice wells. But the Entice results to date have been well above that analog. Soon, Manitok will have had its Entice wells on for a five-month period. In another month or so we'll be getting results on those and, hopefully, we'll see a different royalty rate structure for the company too. And costs are coming down across the board in the sector, so the cost per each well should be lower, leading to 2025% internal rates of return on drilling. With all of that meshed together, even at $50/bbl oil, this company will look appetizing. The market should be more relaxed about the company's debt level, which is about 1.5x EBITDA versus the peer average above 2x. . .the bigger catalyst here is seeing what the well results are, and getting the facilities issues locked down. Hopefully, Manitok will be viewed as a diamond in the rough." read more >

Management Q&A: View From the Top
Mass Geremia
The oil price collapse has left most of the industry reeling, but Mass Geremia remains unbowed. The president and CEO of Manitok Energy Inc. explains how his strategy of prudent and efficient "old school" expansion has Manitok on track to become an intermediate producer before the end of the decade.
read more >
"Manitok Energy Inc. has decided to suspend drilling at its Entice and Stolberg properties and apply 80% of its cash flow to debt reduction in H1/15. This is a prudent move. This is survival of the fittest, and maintaining a flexible balance sheet so that you can come out on the other side when commodity prices improve is crucial.

This company has had some good wells out of Entice. . .we think Manitok has a lot of potential in some of the formations on that property. . ." read more >

Stockwatch (2/4/15)
"Manitok Energy Inc. spent more in 2014 at Entice than was required under its earn-in deal with PrairieSky Royalty Ltd., so the extra spending will be carried forward, reducing this year's commitment to $20.9M. The company would otherwise have had to spend $33M. . .as well, Manitok sold some infrastructure (with an option to buy it back within eight years) for $15M, reducing its net debt to $77.5M on a $105M credit facility."

Chad Ellison, Dundee Capital Markets (2/4/15)
"Manitok Energy Inc.'s infrastructure sale improved the balance sheet. . .on December 30, the company entered into an agreement to sell its facilities to a third party for $15M, reducing its corporate year-end net debt to $77.5M."

Chad Ellison, Dundee Capital Markets (11/17/14)
"Manitok Energy Inc.'s Q3/14 is in line, and its production guidance reaffirmed. . .Entice production is slated to be tied-in in December and in Q1/15 following the completion of the multi-well battery. There is enough behind pipe production that management expects South Entice will keep the 7 Mmcf/d gas plant at capacity (~1,800 boe/d, ~40% liquids). . . at Stolberg, one well is currently planned for Q1/15. As a result, H1/15 capex is expecting to be only 6070% of cash flow, which should see ~$9M in debt reduction."

Shailender Randhawa, RBC Capital Markets (11/17/14)
"In Q3/14, Manitok Energy Inc. reported CFPS of $0.12, which met our expectations on improved unit opex performance and lower corporate overhead expense. . . in December, we expect production tests on four Entice wells, including at least 1 Glauc well and 2 Basal Quartz wells. . .we maintain our Outperform rating."

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