Southern Pacific Resource Corp STPJF

RE:RE:RE:RE:RE:RE:Strategic Review

[Eyeinvestor]

Himmler,
We know there were interested parties for two reasons:-
1. The Management raised $150 million and described a capex plan. A few weeks later they suspended the capex plan due to some kind of development resulting from the strategic review. The only development that we can think of that would cause capex to be suspended would be a potential sale of the company
2. Even a few cursory calls around Calgary including brokers and bankers will tell you that people expressed interest and signed Non Disclosure agreements in order to look at the data room.
What we do not know is how much an interested party is willing to pay for STP or McKay. Anyone would pay $250 million for STP.....but of course that would leave stock holders with nothing, debenture holders with nothing and second lien bond holders with 38 cents on the dollar. In order for anything to be left over for the common stock holder the value of STP as a whole needs to be in excess of $582 million. Assuming that there is still $80 million of cash on the balance sheet from the term loan, we need the value of Senlac + the Value of the steam plant at McKay (cost $450+ million) + the value of the reserves in the ground at McKay+ a few miscellaneous assets ....to be greater than $500 million. Eye think they are worth at least $700 million....but unfortunately eye don't have a spare $700 million leyeing around (spent it all on Shat's Christmas gift). So let me give Himmler's more realistic reason #4:
#4 The finalized offer from the interested party has come in too low and management is making new plans to go it alone.
Eye think this is unleyekely because the first thing that would happen very quickly is an acceleration of the ICD installations because chasing cash flow would become all important. We would hear about that.
The most leyekely reason for delay in meye book is that they are dickering on the terms. The lowest value eye have seen is 13 cents per share, which was pre-ICDs. The highest is $1.05. Who knows?