PENGROWTH ENERGY CORP. $5.02 - Toronto symbol PGF

PENGROWTH ENERGY CORP. $5.02 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 528.1 million; Market cap: $2.7 billion; Price-to-sales ratio: 2.0; Dividend yield: 9.6%; TSINetwork Rating: Average; www.pengrowth.com) is shifting away from its traditional oil and natural gas operations and into projects with better long-term potential, such as its Lindbergh oil sands development in Alberta’s Cold Lake region.

Pengrowth is spending $630 million on Lindbergh’s first phase, which should start up in early 2015 and produce 12,500 barrels a day. That’s equal to 16.9% of Pengrowth’s second quarter output of 73,823 barrels a day (56% oil and natural gas liquids, 44% natural gas). Future phases will raise the project’s daily production to 50,000 barrels by 2020. Lindbergh’s reserves should last 25 years. The company’s cash flow per share will probably fall from $1.09 in 2013 to $1.01 in 2014. However, it should improve to $1.38 in 2015. The stock trades at a low 3.6 times that forecast.

Pengrowth’s improving cash flow should also let it keep paying monthly dividends of $0.04 a share, for an 9.6% annualized yield.

Pengrowth is a buy.

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