Stock Trades: Bought Pinecrest Energy

Last Friday, I bought 1,000 shares of Pinecrest Energy (TSXV:PRY) at $1.92.

Trade Commentary

Now that the QE-Infinity ship has sailed, we all know the price of oil has a solid floor under it at least in the near term. Since Canadian light oil has been trading above WTI, I believe PRY is one of the best vehicles to profit from this premium. Pinecrest Energy was featured not that long ago on this site as one of the best junior oil stocks in Canada. I have bought and sold it several times across my accounts. Its 99% light oil weighting combined with an excellent management team keeps the company on top of my watch list.

A somewhat disappointing Q2 due to an extended breakup is now behind us. With 4 drilling rigs currently operational the company is on track to meet its year-end guidance of 5,000-5,200 bopd.

The company also disclosed in its last report that its waterflood operation at EVI has exceeded expectations. Two wells witnessed a 4-5x production increase since the company began continuous water injection in May. ??It costs anywhere from $5 to $10 to produce a barrel of oil through waterflood. This is the most profitable oil Canadian producers will ever sell!

On a $ per flowing barrel basis, the company is expensive, I’ll give you that. In return, you have to agree with me that these guys are masters of growth. According to my model, if they average 6,000 bopd in 2013, the company is looking at roughly $0.58 in cash flow per share.

That’s based on $80 Edmonton PAR oil, a very conservative figure under the current circumstances. Should the market decide to look forward into 2013, I don’t see why PRY’s stock wouldn’t settle into the $2.50-$3.00 range.

What do you think of PRY?