RE: RE: Equal Energy & The Theater Of The Absurd I understand that the reason for the downdraft today was a fund wanted to ease out losing patience this week before the end of the month, but with the US market closed for two days the fund (which have a very minor position) dumped their shares today. And because the shares are so thinly traded (for now) knocked the share price down so I took some of their shares off their hands and doubled my position.
Rumors are flying that the Canadian assets are being looked at by a number of companies and the that the sale could fetch a fairly high price. If they get say $55 million, their debt level is just over $40 million.......$170 MILLION OF DEBT ALL THE WAY DOWN TO $43 MILLION WHILE THE 1P RESERVES REMAIN OVER 30 MILLION BBLS AND THE PRODUCTION IS REDUCED FROM JUST OVER 10,000 BBLS TO ~8000 BBLS.WHICH IS LIQUIDS RICH AND IN A VERY PROLIFIC NGL GEOLOGY.
When they divest of the Canadian assets they are very likely to convert to either a US MLP or a Canadian income trust. Either way they will be able to pay an ~8% dividend at a $6.50 share price. They will have a VERY LOW debt level and the company will be highly de-risked....very low interest costs and a high degree of flexibility. They could very easily do a share purchase tender and buy back 5 million shares or so to produced even more value at the share holder level.
Natural gas liquids prices are increasing and will continue to increase with the NGL export opening up significantly in early and mid 2013.
Having a production of ~8000 BBLS with over 30 million BBLS of 1P reserves and a very very low debt level has to translate into a $5.50 to $6.50 share price at current gas and NGL prices and even higher if the prices rebound to historical averages.
Help me understand what is not to like....EQU looks to me like a screaming buy but remembe impatence is the killer of equity returns and the seller today like experienced a very high loss per share.