Daily Letter | 1 Canacol Energy Ltd. LED YOU DOWN A HOLE

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Daily Letter | 1
11 December 2014______
Canacol Energy Ltd.
Christopher Brown - Canaccord Genuity Corp. (Canada)
BUY 
[email protected]
Target: C$7.50 
[email protected]
CNE : TSX : C$1.63
COMPANY STATISTICS:
Forecast Return %:
52-week Range:
Avg. Daily Vol. (000s):
Shares Out (M) basic:
Shares Out (M) fd:
Market Cap (M):
Current Net Debt (surplus) (M):
Current Enterprise Value (M):
360%
C$1.53 - 8.77
694
107.8
114.4
C$175.7
C$131.4
C$307.1
EARNINGS SUMMARY:
FYE Jun
Oil & NGL (b/d):
Natural Gas
(mmcf/d):
Total (boe/d):
EPS fd:
CFPS fd:
CF/boe:
EV/DACF:
NAV fd:
CAPEX (M):
2014A
7,660
2015E
11,941
2016E
15,170
17
18
56
10,437
14,982
24,489
US$0.11 US$0.34 US$0.95
US$0.85 US$1.00 US$1.87
US$22.99 US$23.72 US$25.28
10.3
3.1
1.4
C$9.25 C$10.40 C$11.10
US$141
US$185
US$144
SHARE PRICE PERFORMANCE:
Source: Interactive Data Corporation
COMPANY DESCRIPTION:
Canacol Energy is a Canadian-listed oil exploration and
production company with properties focused in Colombia and
Ecuador. In late 2012, Canacol acquired Shona Energy, a natural
gas producer with long-life reserves and strategic blocks
immediately offsetting the company's heavy oil acreage in the
Caguan basin of Colombia. With a new emerging unconventional
shale opportunity, we believe the company is poised to renew
shareholder interest.
All amounts in US$ unless otherwise noted.
1.403.508.3858
Kimberly Hedlin - Canaccord Genuity Corp. (Canada)
1.403.508.3854
Energy -- Oil and Gas, Exploration and Production
LED YOU DOWN A HOLE…
TIME TO LEAD YOU OUT
Investment recommendation
Canacol’s share price retreated an additional 17% yesterday as selling
pressure continues. However, in our view, the company has been overly
penalized in a heavily negative market; while international oil-weighted
E&Ps are off approximately 70% from mid-summer highs, Canacol is
down approximately 80%. Although we believe valuations and peer
comps have become less meaningful during this unrelenting sell-off, we
also believe the time is ripe to capitalize on opportunities like Canacol,
which have a line of sight on multi-year growth.
Investment highlights

By 2016, nearly 40% of Canacol’s production is expected to be
natural gas with fixed long-term contracts. The company also
receives fixed prices on Ecuador oil sales, which account for 15% of
our CY2015 estimated production volumes.

Approximately 45% of our C$7.50/share base 2015E NAV is derived
from Canacol’s gas contracts. In conjunction with the company’s
Ecuador oil contract, approximately two-thirds of our base NAV is
derived from production with fixed price contracts.

When the company releases its 2015 budget in January, we expect a
half year outlook. H2/15 plans will likely be announced later in
2015.

We believe the worst of the downward pressure on Canacol’s share
price should conclude in the near term. We are also optimistic that
oil-weighted E&Ps will begin to see a floor in trading this month.
Valuation
We use a DCF model to estimate base and risked 2015E NAVs of C$7.50
and C$10.40/share, respectively. Our C$7.50/share target aligns with
our base NAV.
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the Investment Analyst’s personal, independent
and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important information,
please see the Important Disclosures section in the appendix of this document.
Daily Letter | 2
11 December 2014
NO ONE CAN CALL THE BOTTOM, BUT HERE WE ARE
Canacol’s share price retreated an additional 17% yesterday as selling pressure continues;
in our view, the company has been overly penalized in a heavily negative market. While
international oil-weighted E&Ps are off approximately 70% from mid-summer highs,
Canacol is down approximately 80%. Although we believe valuations and peer comps have
become less meaningful during this unrelenting sell-off, we also believe now is the time to
capitalize on opportunities with a line of sight on multi-year growth.
In our view, 2008 had a Darwinian impact on the surviving internationals today. Realizing
the limited options for equity financing, most companies have been trained to live within
their financial means for growth. While Canacol was successful at recently completing a
financing at a non-dilutive share price, the share price has subsequently fallen nearly 80%
since the financing. In our view, those with a long-term investment horizon on Canacol
should enjoy the benefits of a strong 2016 combined with a growing inventory of
exploration locations in both conventional and unconventional oil plays. Investors that are
suffering include those having to report month-to-month gains/losses and traders with
short-time horizons. Either way, we believe that the company is at or near an excellent
accumulation level particularly given its ability to decouple revenue streams from Brent in
2016.
The value of international gas…
Canacol’s gas contracts going forward should not be underestimated. If Brent prices
remain weak through 2015 and North American gas prices remain soft, there are few
options in the energy sector for commodity price upside other than internationals. Canacol
currently has 18 MMcf/d locked in at approximately $5/MMBtu with a 2% escalation factor.
In December 2015, the company is expected to initiate two new contracts of 35 MMcf/d at
~$5.40/MMBtu and 30 MMcf/d at $8.00/MMBtu. Management forecasts 2016 EBITDA of
$170 million associated with its 83 MMcf/d of contracted production. The company is also
pursuing incremental opportunities for upwards of 60 MMcf/d that would likely be
contracted at or above $8/MMBtu.
As we stated earlier, 45% of our C$7.50/share base 2015E NAV is associated with
Canacol’s gas contracts. In our view, investors are selling the shares, to some degree, due
to an over-emphasis on debt levels. However, it is our opinion that the market “can’t see
the forest for the trees” as the market ignores longer-term opportunities. We believe debt is
only an issue if the company cannot repay or renegotiate it, or if the repayment of nearterm debt impacts future growth. In our view, the company should be able to refinance
current debt and should be able to grow into 2016 with current sources of funding. As
such, we maintain that Canacol’s current share price provides a solid entry point for
investors going into 2015.
2015 outlook
As we stated in our, “Reduction in Guidance; Reducing Target”, publication November 13,
2014, “We believe soft Q1/F15 financials, along with reduced production guidance, will
weigh heavily on the stock through year end”. Now that we believe the worst of the share
price correction is behind us, we think there is a solid opportunity to accumulate the stock
at these levels.
Daily Letter | 3
11 December 2014
Based on our sensitivity analysis, the company could execute a self-funded $200 million
capex program in 2015 with Brent prices of $50/bbl. In this scenario, 2016 would be a
rebuilding year (in terms of the balance sheet). However, by this time ~40% of the
corporate production should be from long-term gas contracts.
We expect the company will likely provide a two-stage budget to remain dynamic in the
face of volatile Brent prices. As such, Canacol should be able to re-allocate funds
accordingly. The major unknown is where Brent prices will go in 2015. It is our belief that
Brent will be under pressure through Q1/15. However, as commodity traders begin to
speculate on a positive outcome from the OPEC meeting in June, futures contracts should
trend higher. This, combined with ongoing capital cutbacks from North American
producers, should put upward pressure on oil from the supply side. When oil prices
eventually turn around, we believe international oil producers should be well positioned to
capitalize on improved pricing through increased spending in H2/15 (versus the Majors,
which tend to be less dynamic in deploying capital programs).
VALUATION
We have made no changes to our DCF model or NAV estimate for 2015E. The company is
expected to release its updated 2015 capital program in January, which will impact both
our capital estimates as well as our production expectations. In the interim, we believe the
company can manage within its means with a capital budget under $200 million. As we
stated earlier, we believe that most international companies will give six-month capital
guidance with some optionality to increase H2/15 capital guidance depending on the status
of Brent pricing by mid-2015.
We note that even with a $50-55/bbl Brent price deck, we do not foresee liquidity issues
based on our current production projections. In our view, the expected boost in sales from
gas volumes (starting December 2015) should be a significant driver of cash flows going
forward. Given Canacol’s significant resource inventory, solid base development program,
and discounted valuation, we maintain our BUY recommendation.
Daily Letter | 4
11 December 2014
Figure 1: Fiscal 2015E NAV
2015E Net Asset Value
(US$ unless otherwise stated)
Resources
After Tax
10%
Disc.
(MM$)
62
After Tax
12%
Disc.
(MM$)
62
After Tax
15%
Disc.
(MM$)
62
LLA-23
Esperanza gas
Libertador & Atacapi (Ecuador)
Other (Colombia)
Serrania
Coati
+ Working Capital
- Debt
+ Corporate Items
Net Asset Value
260
341
160
31
49
4
37
(153)
35
764
219
308
153
32
43
4
37
(153)
35
678
199
275
137
26
36
3
37
(153)
35
595
7.50 $
6.65 $
5.85
104
104
104
83
211
1,059
66
173
917
48
129
772
10.40 $
9.00 $
7.55
2015E Base NAV (C$/sh)
$
Total Resources
Conventional upside
Unconventional upside
Upside Net Asset Value
2015E Risked NAV (C$/sh)
$
Assumptions:
Production (b/d)
Funds from Operations (US$ MM)
Capital expenditures (US$ MM)
Brent (US$/bbl)
F/D Shares O/S (MM)
Source: Company reports, Canaccord Genuity estimates
2014E
10,437
76
141
109
114
2015E
14,982
108
185
86
114
2016E
24,489
202
144
87
114
Daily Letter | 5
11 December 2014
The following section was taken from our November 13, 2014 publication titled
”Reduction in Guidance; Reducing Target”
LLA-23 – Likely drilling inventory into 2016
The company highlighted that, despite the downturn in global commodity prices, that LLA23 block remains highly profitable due to the high deliverability and its lower-cost
structure. The company intends to drill two development wells and additional exploration
wells before year end (Maltes-1 and Pastor-1).
The company is in the process of shooting 400 square kilometres of 3D seismic with a
target to firm up the 12 currently identified exploration leads shown in Figure 2. The
inventory of locations has the potential to provide drilling inventory into 2016.
Figure 2: LLA-23 prospect map
Source: Company reports
Daily Letter | 6
11 December 2014
SHALE – Up to 30 shale exploration wells expected through to the end of 2015
The company has benefited from conventional discoveries on its shale blocks via “free
looks” due to the deeper shale drilling on block VMM-2. The company plans to drill an
additional appraisal well into the shallow Lisama discovery prior to the end of 2014.
(subsequent to our November 13, 2014 publication, the company has decided not to drill)
On the VMM-3 block, the operator (Shell) spudded the Pico Plata-1 exploration well in early
October 2014. The well will target the La Luna shale formation. As shown in Figure 3,
there is a substantive number of shale locations planned into 2015 by various operators.
Canacol’s northern shale blocks have ConocoPhillips, Exxon and Shell as operators, with
the company being carried on 19 total locations in this region. The company’s independent
auditor has identified a net mean prospective shale resource of 185 million barrels with
estimated value of $1.3 billion (on the three northern blocks alone).
Figure 3: Shale proximity map
Source: Company reports
Daily Letter | 7
11 December 2014
Gas upside late 2015 – Canacol’s gas production should greatly reduce commodity
price volatility in 2016 and beyond
The company has successfully drilled the Corozo-1 gas exploration well and is awaiting a
production test. The Canandonga-1 exploration well is expected to be drilled next, likely
before year end. Management estimates that Canandonga could be as large as 67 Bcf on an
unrisked recoverable prospective resource basis.
In 2015, the company intends to follow with up to five appraisal/development locations in
order to deliver the 83 MMcf/d of contracted gas by the end of 2015. In our view, this
property should bring stability to the cash flow statement in future years as the company
has contracted the gas at various fixed prices (from $5 to $8/MMBtu) for up to five-year
terms. The company is currently pursuing an additional 60 MMcf/d of fixed contracts to
capitalize on the high gas prices that can currently be locked in for long-term contracts.
In the short term, Canacol also announced a price increase on current sales. Canacol
currently sells approximately 18 MMcf/d of gas from the Nelson Field to a local ferronickel
producer under a 10-year contract that expires in 2021. That contract was linked to the
Guajira price index, which changed effective October 29, 2014 from $3.97/MMBtu to
$5.08/MMBtu. This should benefit production netbacks starting this quarter.
Figure 4: Esperanza block
Source: Company reports
Daily Letter | 8
11 December 2014
TARGETING 35,000 BOE/D BY 2016
The company has ambitious plans to achieve 35,000 boe/d by 2016. With gas production
already contracted for 14,561 boe/d, the company needs to grow its oil production to
~20,400 b/d by 2016. The company indicated that its 13 existing fields currently contribute
43 million boe of 2P reserves with an NPV of $887 million shown in Figure 5.
Figure 5: Canacol long-term production estimates (November 12, 2014)
Source: Company reports
Daily Letter | 9
11 December 2014
APPENDIX I: FINANCIAL STATEMENTS
We outline our current financial projections for Canacol below (effective December 10,
2014).
Figure 6: Canacol’s income statement (US$000s)
June 30 YE
Oil and Gas Revenue
Royalties
Share of joint venture profit and other
Total Revenue
2013A
160,154
(12,488)
147,666
2014A
229,074
(21,287)
3,532
211,319
2015E
278,568
(27,142)
9,481
260,906
2016E
458,346
(41,783)
10,070
426,633
Operating
General and Administration
Depletion, Depreciation and Accretion
Stock Option Compensation
Other
Total Operating Expense
75,628
22,236
48,240
8,041
137,140
291,285
67,559
27,045
38,740
7,290
11,731
152,365
89,125
26,225
83,645
4,121
266
203,383
118,481
40,416
122,231
3,959
109
285,196
(16,211)
(523)
(2,818)
(19,552)
(9,656)
2,057
(19,402)
(27,001)
(21,548)
(2,485)
5,130
(18,903)
(21,072)
(21,072)
Income (Loss) Before Income Taxes
(163,171)
31,953
38,621
120,365
Current Income Tax
Future Income
Income Taxes
Non-controlling interest
Net Income
2,033
(44,592)
(42,559)
(120,612)
24,823
(2,807)
22,016
9,937
16,140
(14,411)
1,729
36,892
39,140
(21,537)
17,603
102,762
(1.61)
0.11
0.34
0.95
Finance Income (Expense)
Foreign Exchange Gain (Loss)
Other
Net Finance Income (Expense)
EPS - Fully Diluted, Continuing
Source: Company reports, Canaccord Genuity estimates
Daily Letter | 10
11 December 2014
Figure 7: Canacol’s cash flow statement (US$000s)
June 30 YE
Net Income
Depletion, depreciation and accretion
Deferred income
Impairment, loss (Gain) on acquisition
Stock-based compensation
Finance Costs
Deferred Income Tax
Unrealized (gain) loss on Commodity Contracts
Unrealized loss on financial Instruments
Unrealized (gain) loss on foreign Currency Translation
Other
Other (inc. E&A write off)
Cash From Operations
Changes in Non-Cash Operating Working Capital
Cash Flow from Discontinued Operations
Cash Flow From Operations
CFPS - Fully Diluted
2013A
(120,612)
48,240
3,731
1,000
8,041
16,211
(44,592)
1,184
(295)
(18,759)
157,007
51,156
(21,611)
29,545
2014A
9,937
38,740
7,290
9,656
(2,807)
24,288
(959)
(17,777)
10,963
75,799
2,145
77,944
2015E
36,892
83,645
4,121
9,104
(14,411)
(5,130)
3,383
176
108,299
22,930
131,229
2016E
102,762
122,231
3,959
4,496
(21,537)
109
201,949
(757)
201,192
0.68
0.85
1.00
1.87
Issue of common shares
Borrowing (Repayments)
Other Financing Activities
Cash From Financing Activities
(354)
102,043
(8,874)
92,815
120,405
74,045
(6,679)
187,771
434
6,000
(2,144)
4,290
(34,367)
(34,367)
Additions to intangible E & E assets
Additions to Petroleum properties
Divestitures/(Acquisitions) not assigned to PP&A or E&E
Additions to Other Assets
Changes in Restricted Cash
Change in non-cash Investing working capital
Other Investing Activities
Cash Flow From Investing Activities
(24,813)
(49,267)
(34,781)
(3,159)
2,861
8,300
(100,859)
(25,358)
(107,523)
(8,314)
(40,433)
27,352
(154,276)
(66,479)
(118,816)
(36,891)
13,434
207
(208,545)
(10,623)
(133,647)
(144,271)
Foreign Exchange Gain (Loss)
Increase/(Decrease) in Cash
Cash - Open
Cash - Close
Source: Company reports, Canaccord Genuity estimates
21,501
30,789
52,290
111,439
52,290
163,729
(73,026)
163,729
90,703
22,555
90,703
113,258
Daily Letter | 11
11 December 2014
Figure 8: Canacol’s balance sheet (US$000s)
Cash and Cash Equivalents
Restricted Cash
Accounts Receivable
Inventory
Deposits and Prepaid Expenses
Derivative Commodity Contracts
Other current assets
Current Assets
Exploration and Evaluation Assets
Property and Equipment
Other Assets
Total Assets
52,290
7,127
38,141
3,261
11,331
1,875
114,025
92,753
238,278
24,536
469,592
163,729
7,379
60,981
1,936
12,405
5,254
251,684
133,510
301,398
69,995
756,587
90,703
35,697
43,520
1,338
10,997
3,417
185,672
173,923
364,297
101,324
825,216
113,258
35,697
78,816
1,338
10,997
3,417
243,523
184,437
377,313
132,931
938,204
Accounts Payable and Accrued Liabilities
Current Portion of Long Term Debt
Other Short Term Liabilities
Current Liabilities
Asset Retirement Obligations
Long Term Debt
Deferred Tax
Convertible Debentures
Other Long-Term Liabilities
Total Liabilities
Share Capital
Contributed Surplus
Accumulated Other Comprehensive Income
Retained Earnings (Deficit)
Subtotal Equity (Shareholders Equity)
Total Liabilities and Equity
37,219
6,100
43,319
7,995
134,316
3,861
22,091
18,707
230,289
408,770
40,074
347
(209,888)
239,303
469,592
75,814
44,000
18,912
138,726
10,518
166,688
1,054
25,395
13,919
356,300
551,049
48,842
347
(199,951)
400,287
756,587
94,825
84,367
24,931
204,122
11,759
162,517
4,402
382,801
551,590
53,537
347
(163,059)
442,415
825,216
129,363
58,667
24,931
212,961
13,359
158,347
4,402
389,069
551,590
57,496
347
(60,297)
549,136
938,204
Source: Company reports, Canaccord Genuity estimates
Daily Letter | 12
11 December 2014
Investment risks
Investors need to be aware of the risks inherent in the oil and gas industry. Without
limitation, these risks include:
Trading liquidity risks.
Geological, engineering, regulatory and environmental risks related to the exploration for
and development of crude oil and natural gas resources.
Volatility in crude oil and natural gas prices that can materially affect financial
performance and the accuracy of estimates.
Access on favourable terms to oilfield services, equipment and labour.
Favourable access to external capital.
Country risk -- the majority of the company's producing and potential properties are
presently located in Colombia. The company's operations, financial results, and valuation
could be adversely affected by events beyond the company's control taken by the current
or future governments with respect to policy changes regarding taxation, regulation, and
other business environment changes.
Daily Letter | 13
11 December 2014
APPENDIX: IMPORTANT DISCLOSURES
Analyst Certification:
Compendium Report:
Site Visit:
Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby
certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring
analyst’s personal, independent and objective views about any and all of the designated investments or
relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part
of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may
not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the NASD Rule 2711
and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.
If this report covers six or more subject companies, it is a compendium report and Canaccord Genuity and its
affiliated companies hereby direct the reader to the specific disclosures related to the subject companies
discussed in this report, which may be obtained at the following website (provided as a hyperlink if this
report is being read electronically) http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by
sending a request to Canaccord Genuity Corp. Research, Attn: Disclosures, P.O. Box 10337 Pacific Centre,
2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request by email to
[email protected] The reader may also obtain a copy of Canaccord Genuity’s policies and
procedures regarding the dissemination of research by following the steps outlined above.
An analyst has not visited Canacol's material operations.
Price Chart:*
Distribution of Ratings:
Coverage Universe
Global Stock Ratings
(as of 1 October 2014)
IB Clients
Rating
#
%
%
627
60.2%
36.7%
53
5.1%
54.7%
Hold
317
30.5%
13.9%
Sell
43
4.1%
2.3%
Buy
Speculative Buy
1041
100.0%
*Total includes stocks that are Under Review
Daily Letter | 14
11 December 2014
Canaccord Genuity
Ratings System:
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the
designated investment or the relevant issuer.
Risk Qualifier:
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental
criteria. Investments in the stock may result in material loss.
Canaccord Genuity Research Disclosures as of 11 December 2014
Company
Canacol Energy Ltd.
1
2
Disclosure
1A, 2, 3, 7
The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated
companies. During this period, Canaccord Genuity or its affiliated companies provided the following services
to the relevant issuer:
A. investment banking services.
B. non-investment banking securities-related services.
C. non-securities related services.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for
Corporate Finance/Investment Banking services from the relevant issuer.
3
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead
manager or co-manager of a public offering of securities of the relevant issuer or any publicly disclosed offer
of securities of the relevant issuer or in any related derivatives.
4
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affiliated companies may have an agreement with the relevant issuer relating to the provision of Corporate
Finance/Investment Banking services.
Canaccord Genuity or one or more of its affiliated companies is a market maker or liquidity provider in the
securities of the relevant issuer or in any related derivatives.
In the past 12 months, Canaccord Genuity, its partners, affiliated companies, officers or directors, or any
authoring analyst involved in the preparation of this research has provided services to the relevant issuer for
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Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive
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months.
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the preparation of this research, has a long position in the shares or derivatives, or has any other financial
interest in the relevant issuer, the value of which increases as the value of the underlying equity increases.
The authoring analyst, a member of the authoring analyst’s household, or any individual directly involved in
the preparation of this research, has a short position in the shares or derivatives, or has any other financial
interest in the relevant issuer, the value of which increases as the value of the underlying equity decreases.
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publication is within 10 days following a month end, Canaccord Genuity or its affiliated companies, in the
aggregate, beneficially owned 1% or more of any class of the total issued share capital or other common
equity securities of the relevant issuer or held any other financial interests in the relevant issuer which are
significant in relation to the research (as disclosed above).
As of the month end immediately preceding the date of publication of this research, or the prior month end if
publication is within 10 days following a month end, the relevant issuer owned 1% or more of any class of the
total issued share capital in Canaccord Genuity or any of its affiliated companies.
Other specific disclosures as described above.
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Daily Letter | 15
11 December 2014
“Canaccord Genuity” is the business name used by certain wholly owned subsidiaries of Canaccord Genuity
Group Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and
Canaccord Genuity (Australia) Limited, an affiliated company that is 50%-owned by Canaccord Genuity Group
Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord
Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto,
Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in New York, Boston,
San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with principal offices located
in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer
with principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will
receive) compensation based upon (among other factors) the Corporate Finance/Investment Banking
revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and
will not receive, compensation that is directly based upon or linked to one or more specific Corporate
Finance/Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other
relationship with the issuer that is the subject of this research and may trade in any of the designated
investments mentioned herein either for their own account or the accounts of their customers, in good faith
or in the normal course of market making. Accordingly, Canaccord Genuity or their affiliated companies,
principals or employees (other than the authoring analyst(s) who prepared this research) may at any time
have a long or short position in any such designated investments, related designated investments or in
options, futures or other derivative instruments based thereon.
Some regulators require that a firm must establish, implement and make available a policy for managing
conflicts of interest arising as a result of publication or distribution of research. This research has been
prepared in accordance with Canaccord Genuity’s policy on managing conflicts of interest, and information
barriers or firewalls have been used where appropriate. Canaccord Genuity’s policy is available upon request.
The information contained in this research has been compiled by Canaccord Genuity from sources believed to
be reliable, but (with the exception of the information about Canaccord Genuity) no representation or
warranty, express or implied, is made by Canaccord Genuity, its affiliated companies or any other person as
to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the
facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained
in this research constitute Canaccord Genuity’s judgement as of the date of this research, are subject to
change without notice and are provided in good faith but without legal responsibility or liability.
Canaccord Genuity’s salespeople, traders, and other professionals may provide oral or written market
commentary or trading strategies to our clients and our proprietary trading desk that reflect opinions that are
contrary to the opinions expressed in this research. Canaccord Genuity’s affiliates, principal trading desk,
and investing businesses may make investment decisions that are inconsistent with the recommendations or
views expressed in this research.
This research is provided for information purposes only and does not constitute an offer or solicitation to buy
or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would
be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale
in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation
to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally
permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is
prepared for general circulation to clients and does not have regard to the investment objectives, financial
situation or particular needs of any particular person. Investors should obtain advice based on their own
individual circumstances before making an investment decision. To the fullest extent permitted by law, none
of Canaccord Genuity, its affiliated companies or any other person accepts any liability whatsoever for any
direct or consequential loss arising from or relating to any use of the information contained in this research.
For Canadian Residents:
This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this
research and its dissemination in Canada. Canadian clients wishing to effect transactions in any designated
investment discussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their
particular province or territory.
For United States
Residents:
Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its
dissemination in the United States. This research is intended for distribution in the United States only to
certain US institutional investors. US clients wishing to effect transactions in any designated investment
discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analysts employed outside
the US, as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA.
These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to
the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public
appearances and trading securities held by a research analyst account.
Daily Letter | 16
11 December 2014
For United Kingdom and
European Residents:
This research is distributed in the United Kingdom and elsewhere Europe, as third party research by
Canaccord Genuity Limited, which is authorized and regulated by the Financial Conduct Authority. This
research is for distribution only to persons who are Eligible Counterparties or Professional Clients only and is
exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the
communication of invitations or inducements to engage in investment activity on the grounds that it is being
distributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment
Professionals) and 49(2) (High Net Worth companies, unincorporated associations etc) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be
distributed or passed on, directly or indirectly, to any other class of persons. This material is not for
distribution in the United Kingdom or elsewhere in Europe to retail clients, as defined under the rules of the
Financial Conduct Authority.
For Jersey, Guernsey
and Isle of Man
Residents:
This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information
purposes and is not to be construed as a solicitation or an offer to purchase or sell investments or related
financial instruments. This research has been produced by an affiliate of CGWI for circulation to its
institutional clients and also CGWI. Its contents have been approved by CGWI and we are providing it to you
on the basis that we believe it to be of interest to you. This statement should be read in conjunction with your
client agreement, CGWI's current terms of business and the other disclosures and disclaimers contained
within this research. If you are in any doubt, you should consult your financial adviser.
CGWI is licensed and regulated by the Guernsey Financial Services Commission, the Jersey Financial Services
Commission and the Isle of Man Financial Supervision Commission. CGWI is registered in Guernsey and is a
wholly owned subsidiary of Canaccord Genuity Group Inc.
For Australian
Residents:
This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN 19 075 071 466
holder of AFS Licence No 234666. To the extent that this research contains any advice, this is limited to
general advice only. Recipients should take into account their own personal circumstances before making an
investment decision. Clients wishing to effect any transactions in any financial products discussed in the
research should do so through a qualified representative of Canaccord Genuity (Australia) Limited. Canaccord
Genuity Wealth Management is a division of Canaccord Genuity (Australia) Limited.
For Singapore
Residents:
This research is distributed pursuant to 32C of the Financial Advisers under an arrangement between each of
the Canaccord Genuity entities that publish research and Canaccord Genuity Singapore Pte. Ltd who are an
exempt financial adviser under section 23(1)(d) of the Financial Advisers Act. This research is only intended
for persons who fall within the definition of accredited investor, expert investor or institutional investor as
defined under section 4A of the Securities and Futures Act It is not intended to be distributed or passed on,
directly or indirectly, to any other class of persons. Recipients of this report can contact Canaccord Genuity
Singapore Pte. Ltd. (Contact Person: Tom Gunnersen’s tel # is +852 3919 2561) in respect of any matters
arising from, or in connection with, the [analyses or report].
For Hong Kong
Residents:
This research is distributed in Hong Kong by Canaccord Genuity (Hong Kong) Limited who is licensed by the
Securities and Futures Commission. This research is only intended for persons who fall within the definition
of professional investor as defined in the Securities and Futures Ordinance. It is not intended to be
distributed or passed on, directly or indirectly, to any other class of persons. Recipients of this report can
contact Canaccord Genuity (Hong Kong). Ltd. (Contact Person: Tom Gunnersen’s tel # is +852 3919 2561) in
respect of any matters arising from, or in connection with, the research.
Additional information is available on request.
Copyright © Canaccord Genuity Corp. 2014. – Member IIROC/Canadian Investor Protection Fund
Copyright © Canaccord Genuity Limited 2014. – Member LSE, authorized and regulated by the Financial
Conduct Authority.
Copyright © Canaccord Genuity Inc. 2014. – Member FINRA/SIPC
Copyright © Canaccord Genuity (Australia) Limited 2014. – Participant of ASX Group, Chi-x Australia and of
the NSX. Authorized and regulated by ASIC.
All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under
copyright to Canaccord Genuity Corp., Canaccord Genuity Limited, Canaccord Genuity Inc. or Canaccord
Genuity Group Inc. None of the material, nor its content, nor any copy of it, may be altered in any way, or
transmitted to or distributed to any other party, without the prior express written permission of the entities
listed above.
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