Pine Cliff Energy Ltd T.PNE

New acquisition

[TheRexmember]

Well done Phil!

10% under PDP
2600 barrels of liquids, 2700 boe gas
38.5 million in net operating income
new bank line which should be paid off quickly 
some new drilling locations 
close to core area

really like the higher liquids cut - 5-6000 barrels of liquids will underpin stronger cash flow during weak gas markets. 

good use of the cash on hand.

the assets pay for themselves in 2.5 years. Likely faster given the time of year it closes.

[Maxmoe]

Not what I bought Pne for. I wanted gas gas gas. 10% under pdp sounds good but that's before tax, with current oil/gas prices I assume. Ie not a bargain point to buy in the commod cycle. I'll do some more work before I pull the trigger but I'm not excited by this acquisition. Example question. They are paying 90% of pdp on 12.3 MM boe of reserves. Again, sounds good, but how much

[Maxmoe]

Addendum. I was thrown by the comments about adding lots of oil. This acquisition will barely move the needle on oil vs gas reserves and production. It's 50/50 going into PNE which is more like 90/10 gas. Pne is about 4X the size so quick math, the ratio goes to 80%. Still plenty gassy for me. The valuation is "reasonable". Certainly not overpaying for assets in a hot market, but not

[TheRexmember]

Max this is and always has been a roll up vehicle. Buying cheaper assets that produce a low - decline stream of cash flow that will translate to dividends. If you don't like this acquisition you were looking at the stock for the wrong reasons to begin with.  pne is 85-87% gas depending on the quarter. Or roughly 3000 barrels per day of liquids. This adds 2600 barrels more - which puts

[Maxmoe]

Yup, the devil is always in the details. I'm looking for the details from the debt agreement. So far I don't know the amount of the debt facility, I do know it's a 3 year term, but no detail about early repayment, what the "amortization"  means or the schedule. What the standby, setup, and any other fees that the private lender can dream up, other than the faceplate

[PabloLafortune]

The way I look at it, the existing gas assets were responsible for the dividend $48M (don't have the exact figure handy) less interest income = $46M.  With the debt that figure goes to $53M or so. The asset they bought will generate $38M at 2024 strip. Therefore, the existing gas assets are now responsible for $18M of the dividend instead of $46M.  Also while the interest rate is

[TheRexmember]

Correct current dividend is 46 million - 13 pennies times 355 million shares. will be interesting to see how big the term loan is. I would have went for about 75 million to keep 30 million in cash but we will see. At 3.00 average gas pne will cash flow about 80 million At 2.00 average gas cash flow is about 75 million.  only about 2/3 of pne gas is sold into Aeco - some hedged at 6

[Maxmoe]

I hope there's something wrong with your numbers or your assumptions are vastly different from mine. If $3 gas is 80/mill in cash flow, and $2 gas is still 75 mill in cash flow, that is not the leverage to gas prices I would expect. That kind of hedging must mean $4,5,6,10 gas would mean cash flow of what 85 million? I'm looking for peak valuation of 5 times cash flow on 350 million shares