BIRCHCLIFF ENERGY $7.00 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 141.4 million; Market cap: $989.8 million; 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.
Prominent Toronto investor Seymour Schulich is the company’s largest shareholder; he owns about 28% of its outstanding shares.
In the three months ended June 30, 2012, Birchcliff’s production rose 27.2%, to 22,039 barrels of oil equivalent per day (including natural gas) from 17,324 barrels a year earlier.
Even so, cash flow per share fell 29.6%, $0.19 from $0.27. The production increase was offset by a 50.6% decline in natural gas prices.
The company’s exploration efforts continue to be successful, and its production keeps rising as it starts up the resulting new wells. In addition, 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, the company expects to finish Phase III, which will double the plant’s capacity. As a result, it will be able to process the 26,000 barrels per day that it expects to produce by the end of 2012.
Birchcliff’s debt of $400.9 million is a manageable 40.5% of its $989.8-million market cap, so it can afford to borrow more to fund its expansion.
The stock trades at 9.2 times the company’s annual cash flow, based on the latest quarter.
Birchcliff is still a buy for aggressive investors.
