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Increased Confidence In Their 2008
Production Has Lead To An Upgrade To A ‘Buy’ For Venoco
Basic Materials
Oil & Gas Drilling & Exploration
Analyst Interview Covering:
Venoco (VQ-NYSE)
Mr. Biju Z. Perincheril
Senior Vice President / Equity Analyst
Jefferies & Company, Inc.
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
To be published – May 2, 2008
CEOCFO:
Mr. Perincheril,
tell us a bit about the universe that you cover and why you’ve chosen to
include Venoco?
Mr.
Perincheril: “I cover
exploration and production companies along with two other analysts here.
What initially attracted me to Venoco was their asset base mix, their
exposure to crude oil and they had two interesting projects on the
horizon.”
CEOCFO:
What projects does Venoco have that you find particularly attractive?
Mr.
Perincheril: “The two main
projects they have that are interesting are: First, the Hastings field in
which Venoco is bringing in Denbury Resources as a partner, and Denbury will
implement a CO2 flood project at the field. Second, is off shore California,
the South Ellwood Expansion Project.”
CEOCFO:
Do you expect the Hastings project to happen soon?
Mr.
Perincheril: “Denbury has
an option to buy the Hastings field from Venoco, either in late 2008 or late
2009. Its looks like Denbury will exercise that option towards the end of
this year and then subsequently they will go ahead and implement the CO2
flood project, which the C02 injection could probably begin by 2010.”
CEOCFO:
What do you like about the management at Venoco?
Mr.
Perincheril: “The
management is quite capable and they obviously have a large ownership within
the company. They have been around for a number of years and they’ve gained
some experience in the areas that they are operating in.”
CEOCFO:
What is your current rating on Venoco and why?
Mr.
Perincheril: “I just
upgraded Venoco to a ‘Buy’ this morning from ‘Hold’ and the primary reason
behind that upgrade was increased confidence in their 2008 production
guidance.”
CEOCFO:
Do you see any challenges to Venoco meeting their goals?
Mr.
Perincheril: “The
challenges are meeting their goals or their production targets. Obviously,
they have had some challenges from the past, so I think the first step is
setting realistic expectations, which I think they are now. Obviously the
performance of their assets and availability of rigs and other services is a
key factor and I think in order to meet their target now they have those
services contracted for.”
CEOCFO:
What is your price target?
Mr.
Perincheril: “$18.”
CEOCFO:
For should people who are looking to pick a company in this sector, why
should Venoco stand out from others?Mr.
Perincheril: “Venoco’s
share price has lagged the E&P index year-to-date and we think the primary
reason for that is the company lowering its production growth target earlier
this year. However, at this point, we think the company’s operations have
stabilized and it is likely to meet its revised production targets. From a
risk reward standpoint, Venoco is attractive because the stock is trading at
a discount to the intrinsic value of its assets.”
CEOCFO:
What should people remember about Venoco?
Mr.
Perincheril: “The key
reason behind our upgrade is increased confidence in their production
guidance. On top of that, there is “optionality” in two major projects: the
Hastings Field and also the South Ellwood Expansion Project.”
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