RMP Is Up For Sale. But Will Shareholders Benefit from a salRMP Energy's banks told the company the line of credit would be slashed by 33%. That's problematic, as RMP already borrowed more than the future new limit, and still expects to be free cash flow negative. Instead of raising more cash with a very dilutive equity financing, RMP has now put the company up for sale. I calculated the potential sale prices, but it doesn't look like the shareholders will receive a much higher price than today's share price. At US$43 oil, RMP was expecting to generate C$40M of operating cash flow, but it would need C$50M to cover its planned capital expenditures. That's a shortfall of C$10M and even though this might not be alarming, the devil is in the details. The company's financiers have told the company the line of credit would be reduced from C$150M to C$120M, with an additional step-down to C$100M by the end of October of this year. That's bad news as the company has already drawn down in excess of C$100M of the credit line, so the funds to repay the excess borrowed amount and the capex shortfall would have to be raised in yet another private placement. And this seems to have been the final drop, and RMP's management now wants someone else to deal with it. So, how much could RMP Energy be sold for? Well, there are two ways to look at how RMP Energy could be valued in a sale. The first way is the easiest way, and that's wondering how much a buyer would be willing to pay per flowing barrel of oil equivalent. Past deals in the sector were priced at anywhere between C$25,000 and 45,000/barrel, and using an anticipated production rate of 8,000 boe/day in FY 2017, this would result in a total value of C$200-360M ($150-270M) for the company. After deducting the net debt of C$105M ($80M), approximately C$95-255M ($70M-190M) would be given to the equity holders of RMP Energy. Bellatrix paid just C$16,000 per flowing barrel for its acquisition, but the purchase by Birchcliff Energy (OTCPK:BIREF) might be closer to the real value of RMP's Montney plays. Unfortunately Birchcliff also paid just US$20,000/flowing barrel, and this would value RMP's assets at roughly US$160M, with an equity value of just $80M after repaying the debt. Using this number, the RMP equity has a value of just US$0.53 per share. (click to enlarge) Source: press release A second way to value a company would be based on the NAV of the assets, using the existing reserve calculations and PV10 values. The PV10 of the 2P reserves is approximately C$347M ($261M) and after deducting the net debt of C$105M ($80M), the net value is approximately C$242M ($181M). RMP is also valuing its undeveloped acreage at in excess of US$120M, and I think it's questionable to realize this value when you're almost forced to sell due to liquidity constraints. I think it's best to completely ignore the acreage as a layer of safety, also because I don't think RMP will receive the full PV10 for its 2P reserves. Based on the net asset value of US$181M, the remaining value of an RMP share is approximately US$1.20.