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(B)(N) PBN PetroBakken Energy Limited

January 14, 2013

Deal Book. PetroBakken Energy Limited has cut its exploration and development budget by 30% from $975 million in 2012 to a proposed $675 million for 2013 (The Canadian Press, January 11, 2013, PetroBakken plans $675-million in capital spending in 2013 to boost output). Undoubtedly, the company knows best what it can do and what it has to do, and we, as investors, can best help ourselves and the industry by practising a discipline of risk aversion in our oil & gas portfolio. We should not expect “elephants of black gold” to leap out of the ground and into our wallets even though the industry has estimated a requirement for $650 billion, or twice its current market value, of new investment over the next ten years. Please see our earlier Post, The Canadian Oil Patch, October 2012.

PetroBakken has a current market value of $1.8 billion and pays a monthly dividend of $0.08 per share or $175 million per year for a current yield of an extraordinary 9.6%. However, the stock price at $10 is below the Risk Price (SF) of $14 and the downside due to volatility is minus ($2.25) per share.

Exhibit 1: B)(N) PBN PetroBakken Energy Limited – Risk Price Chart

(B)(N) PBN PetroBakken Energy Limited

PetroBakken Energy Limited is a light oil exploration and production company comprised of high growth, long-life Bakken reserves and production and legacy conventional light oil assets in southeast Saskatchewan.

(Please Click on the Chart to make it larger if required.)

PetroBakken Energy was 56% owned by PBG Petrobank Energy and Resources Limited and the company distributed its shares to its own shareholders in January 2013 (Marketwire, December 31, 2012, Petrobank and PetroBakken Announce Completion of Reorganization) and similarly, spun off its interest in PMG Petrominerales Limited in December 2010. PBG Petrobank Energy and Resources Limited was $30 in 2010 and trades for $0.99 (99¢) today amid pipe dreams of future heavy oil development on a $100 million budget and we have already noted (please see our Post, October 2012) that its other spin off, PMG Petrominerales Limited, has dropped like a stone from $20 to less than $10 in less than a year.


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