High Arctic Energy Services Inc T.HWO

Valuing the PNG Bus w/rights offering

[JonathanJSmith]

What's interesting is if they go ahead with the rights offering the price needs to be below $0.75 (or whatever the payout is: I thought $0.78).

The reason behind this is that current shareholders may not have additional funds to put in which, indirectly, forces them out or to get a lesser % of the company (assuming they allot for oversubscription). Therefore, a higher valuation results in something that sounds incredibly unethical.

Now, assuming that the rights offering is at $0.75 - they've now valued the PNG business at $36.5MM. This is completely low ball. As such, for things to remain equitable, everyone needs to exercise their rights to purchase the PNG business using their RoC. In essence, this renders the RoC moot. Why not just do the prorata in the first place? Oh, because it's a certainty that many shareholders will not want to partcipate.  Like Dave R. said in a conference call, "very opportunistic" of them. It wouldn't surprise me if the two reps from Cyrus on the BOD suggested this endeavour. 

Disgusting.

[colourama]

Jonathan, amidst all the (opaque) bits and pieces for their plan, they still haven't answered the most basic question:  How is this reorganization going to benefit the average shareholder? What reasons can management provide to shareholders to favour this plan over keeping the company the way it is? I haven't seen any compelling reason clearly spelled out. I would like them to

[JonathanJSmith]

Colourama: I agree w/you. There is absolutely no benefit to current shareholders other than their comment about "unlocking value".  Furthermore, we'd be stuck with new management in the Canadian (new options, higher salaries, etc) entity as Maguire will likely move over to the PNG ops (since he's Australian).  Frankly, just keep the company's structure the way it

[impega]

The price of the PNG rights can't be artificially set at $0.75 just because that equals the dividend payout and creates ease for shareholders to purchase the rights. I would be very pleased if it was $3.00 and I wasn't able to afford the rights because that $3 would flow to the Canadian listed HWO that I already own. As long as PNG is independently and fairly valued I'm OK with it

[Stonksonlyup90]

Wouldn't it also be possible that the wrt is not 1:1? Ie, for every 5 shares of $HWO you would be receiving $3.75 and this could perhaps buy you ONE SHARE of PNG co?

[auburn2]

I have a holding with a shareholder rights plan that allows us to double our holdings at a 50% discount to the prevailing market price if a takeover is attempted. It doesn't concern itself with whether we have the funds to do so. It just gives us the option to double our holdings at the stated discount.

[JonathanJSmith]

Auburn, I think it's a little different here. Currently, each shareholder owns a specirfic percentage of 100% of the PNG business. Why should we be asked to put more money in to keep our percentage the same?  Especially at the time they're ready to ramp up the business? If it's capital they need, then don't give us the RoC. This has got nothing to do with a capital raise. It&

[auburn2]

What we know for certain: the current balance sheet is absolutely wonderful, the latest financial results are excellent even with just 1 PNG rig, the PNG business is worth at least double the current market cap, and they state: "Energy security, evolving attitudes to carbon sequestration and the longevity of Canada’s oil and gas industry as well as growing alternative energy industries

[impega]

Jonathon you are very on point. If they see opportunity in Canada, they currently have plenty of capital to deploy profitably.  There is no reasonn to sell PNG to raise capital. It seems obvious that Cyrus is driving this initiative as they have the most to gain. We'll probably walk away with a little more than the current share price but we would get a lot more by staying the current

[auburn2]

Also, regarding the lack of synergies, I'd argue both divisions are benefited by being able to share financial resources. I'm not keen on giving up my share of ownership in PNG, but nor am I keen on holding private shares with no liquidity.