Seeking Alpha: Lightstream Resources Up, Down, And All Around

It hasn't been a boring six months since the last time I looked at Lightstream Resources (OTCPK:LSTMF) (LTS.TO). I was pretty lukewarm on the shares at that time given the company's high debt, iffy production growth outlook, and execution challenges in the Bakken. Since that last article, the shares dropped about 15% in the first month, roared back with a nearly 70% gain, and then pulled back by a third, ending down about 2% since my earlier article.

So will the real Lightstream please stand up? On the plus side, Lightstream earns some of the best netbacks in the Canadian E&P sector, has a pretty robust drilling inventory across the Cardium, Bakken, and Swan Hills, and generates good capital returns. On the negative side, recent disappointments with Swan Hills and mechanical issues with Cardium wells have rattled investors and management still has some work ahead to deliver on 2014 asset sale goals. On balance I see less execution risk at Baytex (NYSE:BTE) for investors looking for smaller E&P companies with sizable dividends, but Lightstream's relative underperformance has left it looking quite a bit cheaper.

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Lightstream Resources Up, Down, And All Around

Seeking Alpha: Lightstream Resources: A Different Sort Of Oil Play

I've spent a fair bit of time over the past couple of months highlighting oil and gas companies, mostly operators in the Niobrara and Bakken areas, that I feel have been overly punished by the market. Then there is the Lightstream Resources (OTCPK:LSTMF) (LTS.TO) situation. Not unlike Forest Oil (FST), I think years of mismanagement pushed the company into an undesirable situation, though issues outside of the company's control like Western Canadian Select (or WCS) differentials haven't helped.

Relative to long-lived value estimates like NAV and short-term metrics like EV/EBTIDA, Lightstream does not leap out as a huge value. Moreover, the company has work to do in cleaning up its balance sheet. With that heavy debt load, I cannot say that the recently-lowered dividend is entirely safe, though the yield definitely sweetens the potential expected return. If Lightstream can do a good job of selling assets in what is a buyer's market and delivers good drilling results in Swan Hills, there could be some upside here yet.

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Lightstream Resources: A Different Sort Of Oil Play