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Energy Firm's 2019 Guidance Reflects 'Challenged Canadian Gas Market'
Research Report


A CIBC report explained the backdrop for this junior oil/gas company's 2019 projections.

In a Dec. 17 research note, analyst Dave Popowich reported that Painted Pony Energy Ltd. (PONY:TSX) released production and spending guidance for 2019, both of which were "as expected" in that they reflect "the challenged Canadian gas market."

Factors at play, Popowich noted, include lower AECO strip pricing of natural gas and continuing pipeline constraints. "There is clearly little incentive (to say nothing of ability) for natural gas producers to increase output in this commodity tape," he noted.

Popowich relayed that the company forecasts average production next year to be 5456,000 barrels of oil equivalent per day, which represents a 34% reduction from that of 2018. Capital spending is projected to fall within the CA$95110 million range. "The budget is expected to match cash flow, and we believe Painted Pony will manage spending up or down as natural gas prices permit," he wrote.

In light of the current environment and Painted Pony's guidance numbers, CIBC revised its model on the company, Popowich pointed out. It lowered its 2019 capital spending estimate by 23%, to $110.5 million, and its 2019 production projection by 9%, to 54,569 barrels of oil equivalent per day.

Also, CIBC reduced its price target to CA$2.75 per share from CA$3.25 and maintained its Neutral rating on the oil and gas company, which is currently trading at around CA$1.33 per share. "We need to see appreciable improvements in the Western Canadian gas market before we are prepared to get constructive on the name," Popowich indicated.


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Disclosures from CIBC, Painted Pony Energy Ltd., December 17, 2018

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

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Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Painted Pony Energy Ltd. (SSRM)

CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Painted Pony Energy Ltd. in the next 3 months.

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