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Crew Energy Downgraded To 'Sector Performer' By CIBC, PT Cut To $8.50

 November 09, 2012 01:58 PM


(By Balaseshan) CIBC World Markets analyst Adam Gill downgraded rating of Crew Energy Inc. (TSE: CR) to "Sector Performer" from "Sector Outperformer" and lowered price target to $8.50 from $9.50.

The brokerage reduced its 2012 cash flow per share estimate to $1.55 from $1.60 and its 2013 estimate to $1.27 from $1.42.

Gill said the company's Q3/12 production of 26,281 Boe/d was slightly less than his 26,525 Boe/d estimate. Production was lower in the quarter due to shut-in gas production. Crew Energy now has 1,100 Boe/d of high-cost gas production shut-in or deferred, awaiting better gas prices.

Cash flow per share was $0.33, below the analyst's $0.35 estimate. Variances were due to realized prices, offset by lower royalties. Crew spent $44.4 million, bringing capex for the year to about $260 million, up from the $225 million guidance. Accelerated capex into 2012 is not expected to increase production materially this year.

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Production at Princess averaged 6,000 Boe/d, down 40% from the peak in December. Gill believes volumes will be flat to modestly up in 2013, hampering growth of the asset that investors have been seeking. He assumes average production of 7,000 Boe/d for 2013 - low, in his view.

The analyst said Crew trades at 70% of his Risked net asset value and 7.7 times 2013 equity value/debt-adjusted cash flow (EV/DACF), versus the group at 85% and 6.9 times, respectively. Today, Crew trades at fair value given its muted growth profile (down 13% debt-adjusted).

CR is trading down 4.64% at $6.58 on Friday.

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