Longview Oil Corp LGVWF

The BIG one LNV + (SGY, CJ, WCP and TOG)

[Nawaralsaadi]

I have done the accretion calculation for Cardinal Energy, Whitecap, Surge and Torc, I have assumed full issuance of shares for all of Longview (including raising money to pay back the $41m used to buy LNV at the secondary). The calculation is based on a purchase price of $6.47 for 80.2% of the shares (public float) and $4.45 for 19.8% of the shares (secondary shares), or a combined price of $6.07, giving us a a combined multiple of 5.25 EV/CF.

Potential buyers (Cardinal Energy, Whitecap, Surge and Torc) details & estimates for 2014:

Production (bpd):
CJ: 6.15K (90% Oil + Liquids)
WCP: 27.9K (70% Oil + Liquids)
SGY: 16K (84% Oil + Liquids)
TOG: 10K (85% Oil + Liquids)

Cash flow:
CJ: $71m
WCP: $397m
SGY: $244m
TOG: $165m

Decline Rate:
CJ: 15%
WCP: 29%
SGY: 24%
TOG: 25%

1P Reserves:
CJ: 12.78m
WCP: 103m
SGY: 43m
TOG: 25.9m

2P Reserves:
CJ: 17.75m
WCP:146.7m
SGY: 74.3m
TOG: 40.3m

D/CF:
CJ: 0
WCP: 1
SGY: 1.3
TOG: 0.9

Dividend per share:
CJ: 65c per share
WCP: 68c per share
SGY: 54c per share
TOG: 54c per share

EV/CF 2014:
CJ: 6.73
WCP: 7.3
SGY: 5.75
TOG: 6.6

Shares outstanding:
CJ: 37.5m
WCP: 199.8m
SGY: 179m
TOG: 91m

Pro-forma combination:

Pro-forma Production (bpd):
CJ+LNV: 12.5K (85% Oil + liquids) – 103.25% rise in daily production (27.1% accretive per share*)
WCP+LNV: 34.2K (72% Oil + liquids) – 22.5% rise in daily production (10.3% accretive per share*)
SGY-LNV: 22.3k (82.9% Oil + liquids) - 39.3% rise in daily production (10.9% accretive per share*)
TOG-LNV: 16.3K (82.8% Oil + liquids) - 63% rise in daily production (26.8% accretive per share*)

Pro-forma cash flow:
CJ+LNV: $148m 108% rise in cash flow (30.1% accretive per share)
WCP+LNV: $474m 19.3% rise in cash flow (7.4% accretive per share)
SGY+LNV: $321m 31.5% rise in cash flow (4.8% accretive per share)
TOG+LNV: $242m 46.6% rise in cash flow (14% accretive per share)

Pro-forma decline rate:
CJ+LNV: 17% (13% increase)
WCP+LNV: 27% (6.5% slow down)
SGY+LNV: 22.5% (6.3% slow down)
TOG+LNV: 22.5% (10% slow down)

Pro-forma 1P Reserves:
CJ: 33.94m -265% increase (65.8% accretive per share)
WCP: 124.16m – 20.5% increase (8.5% accretive per share)
SGY: 64.16m - 49.2% increase (18.8% accretive per share)
TOG: 47.06m – 81.7% increase (41.4% accretive per share)

Pro-forma 2P Reserves:
CJ+LNV: 55.78m - 314% increase (196.4% accretive per share)
WCP+LNV: 184.7m - 25.9% increase (13.4% accretive per share)
SGY+LNV: 112.3m - 51.1% increase (20.3% accretive per share)
TOG+LNV: 78.3m - 94.3% increase (51.2% accretive per share)

Pro-forma dividend per share (based on an additional $20m in free cash flow):
CJ: 98.4c (51.3.% increase)
WCP: 77c (13% increase)
SGY: 62.8c (16.3% increase)
TOG: 71c (31.4% increase)

Pro-forma D/CF (including $120m in assumed LNV debt):
CJ+LNV: 0.81 (stated target is to move to 0.75 D/CF multiple)
WCP+LNV: 1.09 (9% increase)
SGY+LNV: 1.36 (4.6% increase)
TOG+LNV: 1.15 (27% increase, open to higher multiple)

*Shares to be issued to acquire 100% of LNV at 5.5 EV/CF ($6.47 per share):

CJ: 22.4m shares, total shares outstanding after purchase: 59.8m (59.8% dilution)
WCP: 22.3m shares, total shares outstanding after purchase: 222.1m (11% dilution)
SGY: 45.8m shares, total shares outstanding after purchase: 224.8m (25.5% dilution)
TOG: 26m shares, total shares outstanding after purchase: 117m (28.5% dilution)

As stated before, the above does not take into consideration savings from operational synergies, potential non-core asset sales, an accelerated or slowed down development schedule for the acquired assets.

From the numbers, it looks like TOG and CJ stand to gain the most from such a combination. The accretion may increase of course if any of the buyers opts to keep the $41m used to buy the secondary shares as debt, or if the buyer is able to get a deal done at a slightly lower price. Not to forget, there could be countless other dance partners for whom I haven’t crunched the numbers, but it is clear from the sample above that a deal for LNV in the $6s could be accretive to many dividend focused players.

Enough number crunching for the week, time to take a break, dine out and get drunk with some sake! : )

Regards,
Nawar

[Nawaralsaadi]

(same post with a typo correction) I have done the accretion calculation for Cardinal Energy, Whitecap, Surge and Torc, I have assumed full issuance of shares for all of Longview (including raising money to pay back the $41m used to buy LNV at the secondary). The calculation is based on a purchase price of $6.47 for 80.2% of the shares (public float) and $4.45 for 19.8% of the shares (secondary

[Nawaralsaadi]

By the way, based on the combined acquisition price of $6.07 (80.2% of the public float acquired for $6.47 and 19.8% secondary shares acquired for $4.45), a buyer would be paying the following metrics:   5.25 EV/CF (2014) 5.05 EV/DACF (2014) $67.4K per flowing 2013 trailing $63.6K per flowing 2014 forward $10 for each 2P barrel $19 for each 1P barrel 7.9% yield     The above metrics

[konzelmann]

Definitely some very logical conclusions that make a buyout look mutually beneficial for everyone involved. Can't wait to see how this unfolds in the coming days/weeks.