Please read this post very carefully...... A major positive catalyst for the stock price is coming soon....maybe as soon as Monday.
I am looking for forward to the
refinancing of their debt facility to be announced.
I expect the new facility to have a longer amortization period (6 or 7 years verses the current 4 years) and no principal payback to commense for at least a year maybe two. If this turns out to be the case, the company will have to pay just interest which is about $18 million per year for the first one or even two years. So when they get the EBITDA level back up to $55 -$60 million per year, they will be in a very good position to pay reduce their debt level even more. and if it traded at an EV/EBITDA of 6, the share price would be 6 x $55 million (EBITDA) - $195 (Total debt) /266 million shares = a share price of 51 cents. If the EBITDA gets to $60 million (which is very resonable particularly if the buy back the camp equipment) the share price would be 62 cents
. IF they sell the two heli-rigs and apply the proceeds (~$30 million) to debt, the debt level would be reduced to $165 million so the share price would be 73 cents.
Even if they have just $55 million of EBITDA and an EV/EBITDA of 5, if they sell the heli-rigs and apply the $30 plus million to debt the share price would be 41 cents and BTW 41 cents is a four bagger from here and very easy to attain IMO. Just need to sell the heli rigs for $15 million each (original cost $25 million) and apply the proceeds to debt. Here is the calculation of various valuation scenarios.
This is where you see the power of the 109 million shares that were surrendered by M&P as part of the sale and having a third less shares makes a very big difference in the leverage on the share price when they either increase EBITDA or reduce debt level. This stock could very easily be trading at 50 cents in the not too distant future.
| | Tuscany Drilling | | | | |
| | | EV/EBITDA Valuation Scenarios | | |
| MULTIPLE | X | EBITDA (Millions) | - | NET DEBT (Millions) | / | SHARES | = | SHARE PRICE |
| 5 | | $ 50 | | $ 195 | | 266 | | $ 0.21 |
| 5 | | $ 50 | | $ 165 | | 266 | | $ 0.32 |
| 5 | | $ 55 | | $ 195 | | 266 | | $ 0.30 |
| 5 | | $ 55 | | $ 165 | | 266 | | $ 0.41 |
| 5 | | $ 60 | | $ 195 | | 266 | | $ 0.39 |
| 5 | | $ 60 | | $ 165 | | 266 | | $ 0.51 |
| 6 | | $ 55 | | $ 195 | | 266 | | $ 0.51 |
| 6 | | $ 55 | | $ 165 | | 266 | | $ 0.62 |
| 6 | | $ 60 | | $ 195 | | 266 | | $ 0.62 |
| 6 | | $ 60 | | $ 165 | | 266 | | $ 0.73 |
This is sensitivity analysis on the most important valuation metric shows without a doubt that Tuscany's share price could very easily increase 7 times particularly as a result of having 109 million shares less to spread the performance out over.
We are on our way. Pity some sold so low the last couple of days in ignorance of the facts.