After effects of The CPG-HH deal...."Kelt is a steal at these prices, and even though i think CPG paid a big price to get into the Montney,"
Reallly? Well. let's take a CLOSER look ....shall we?
For Kelt. Because if there's one operator in the Montney which will be greatly impacted by this deal, it's someone like Kelt. The production profiles are "almost" the same, with Kelt having less actual crude and less % in terms of total liquids than HH, BUT where Kelt has a MOJOR advantage over HH is their debt levels. Kelt is basically debt free aside from some decomm liabilities. So after this deal, what is Kelt really worht here in some possible M&A?
First, i'll address tsome comments made by some "biased" folks that Kelt is cheap & a STEAL at this current levels. This of course..... is totally bogus and false ands only propagande by folks, pumpers who desperately hold Kelt stock and want it to go MUCH higher, into the stratosphere, for no apparent reason other than for it to keep going higher till the literal moon so they can profit from it. And that's all fine & dandy if you bought at much lower levels, but not-so-great if you got in recently or decide to get in NOW!
When I bought this recently at $4.50 & chnage.....at that time it was a STEAL like some are promoting even now. But now at $8 bucks, imho after what just transpired with the CPG-HH deal, its obvious that Kelt is VERY close to full value here......at current production rates & profile. As i will demonstrate here..
HammerHead s/h got 2,6B, which includes about 500M of debt for 46 boepd and CPG paid about ~$56 per flowing barrel. At those metrics with Kelt's current production, this mean that IF Kelt mgmt decide to monetize the asets in a potential deal, then Kelt s/h could see about 1,8B MAX or about $9 per share. Wi;l anyone pay those lofty figures, as they did with HH? Probably not the SAME EXACT way.....and there's many valid reasons WHY Kelt s/h will not get the same RICH deal HH s/h got. The first being the difference in the amount of crude both produce AND HH's asset being "mostly" a large uninterupted, contguous property. Klet is really three main assets in comparison.
In addition, i don't believe the Kelt guys will go the same route or take the same EXIT strategy that the HH folks took. The HH people, or Riverstone more or less, wanted totally out of the Canadian O&G space. I don't think this is the same mindset or objectives of Kelt's mgmt. I think Kelt mgmt still want to be employed or involved in the O&G secotr in some manner. And it's for this BIG reason is why i beleive they will either get bigger by buying someone out OR take the Spartan route of a partial sell & spinoff.
So in the end, this the truth, the realty and these are the facts. When Kelt was at $4.50 is was inddeed a STEAL, at $8 & change, not so much and upside VERY limited unless they dramatically increase production levels.....especially crude. And that will be VERY hard to accomplish over a small time period. So if you want to expose yourself to a Canadian O&G producer with some decent upside while mitigating risk, Kelt at these levels probably isn't the best choice now. My advice, your better off with someone like StrathCona, as bad as that sounds or it displeases me. That's probalby your BEST, cheapest BET right now......
But even thoug im' no longer a s/h, i'm still intersted in seeing where Kelt mgmt decide to take the company for the future, becasue i still believe they're in the process of "transitioning" the company to something else than what it currently is..............and to what exactly? We just dont know just yet!
GLTA