Blessed with a new chunk of cash, Paramount Resources has a message for investors: we can handle our expansion plans.
Earlier this week Paramount closed its latest $136-million offering of flow-through shares, and there is speculation that the company will expand its credit facility to $600-million. Should that happen, the gas producer will have drawn only about a third of its available credit lines by year-end.
Because gas prices are still suffering, the last thing Paramount needed was investors who worried about its funds. By getting out ahead of these fears, management initiated a "significant improvement to Paramount's financial flexibility," noted analyst Michael Harvey at RBC Dominion Securities.
"The changes leave the company with ample liquidity, setting up for a 2013 capital program that is expected to be in the range of $400-million," he added, noting that this figure is simply his estimate because the company hasn't released its own projections yet.
With the new funds, Paramount can focus on things like its Musreau plant expansion, which should come on stream in about a year's time. That will help the company to barrel ahead with its current growth. PDP reserves, or those already developed, have grown by about one-third in the past year.
Even though Paramount's new funds should assure investors, it wasn't like they were particularly worried to begin with. The company's price to net asset value multiple is at high end of its peer range. Paramount's is 2.8 times, according to RBC's estimates, while Trilogy has the highest at 4.7 times -- though Trilogy is only 57 weighted to gas while Paramount is 81 per cent weighted to it.
After Paramount, Celtic Exploration has the second highest valuation, with a price to NAV multiple of 2.4 times.
Tim Kiladze