I can't see Donadeo (VET's Chair, informal CEO (they have none currently but are probably grooming their new COO to be the CEO coincident with a re-established dividend being kicked off)) delaying debt paydown or issuing shares at current depressed values. Either would damage credibility ('do what you say you will do') which is gradually being rebuilt after Marino (ex-CEO) was shown the door for overpaying for Spartan acquisition in 2018.
At the same time, French production had screamingly high cash flow netbacks (think it was over $40 CDN/b) even before Brent rose over $65/b, so they'd need a very high transaction value to let go of these important and ever-growing reserves (easy transfer of western Canada re-development skills to low recovery light sweet legacy fields, after 15 years, there are higher reserves than when they bought these fields (I think from Esso/Exxon mostly)).
And 9,000 b/d (it's 100% oil, over 90% light sweet, a bit of sweet medium) plus operatorship will cost more than 3x what it will require to get IPC's 3,000 b/d.
Intriguing concept though. This "deal" (who knows if it even happens) will go at a premium valuation per barrel of reserves sold 1P (33m, as of Dec. 31'20, 85% proved producing) +2P, (12m, same date) there is decades of predictable production history from these fields. My guess is that due to the netbacks and current pricing, we'd get $10-12 for 1P and $7-8 for 2P, so a total of $453m (using the midpoint of my value/boe estimates, note: NPV10 for France is $430m, so my estimates aren't completely barmy). Of course, the 'we'll outlaw ICEs by 2030' gendarmes might reduce buyer's ardour a bit, so say $350-$400m. We'd lose maybe $120m/yr. (France is 2nd highest netbacks/b after Aussie/Wandoo, which typically gets a $5-15/b premium in Asia for being sweet) in FFO but immediately jump down to perhaps $1.4b debt and a sale adjusted debt to cash flow of approx. 1.55-1.6(ish). What to do, what to do??????...
Anyhow, total speculation, all I know is that at the end of Q2, we were down to $2.0b debt (so perhaps $1.85b today) and cash flowing at close to $900m on a forward annual basis, so a ratio of 2.0x. The stated goal is not to exceed 1.5x. I think with current Brent pricing, AECO recovery (the last cash flow run through done on Aug. 31st used $3.53/mcf with production 60% unhedged), we can assume current anualized cash flow is over $1b, so a current debt to cash flow ratio around 1.9(ish). I predict we get to 1.5x in EXACTLY (well, kind of lol) 4-5 months if Brent, AECO and TTF pricing doesn't crash. Possibly sooner than Jan-Feb'22 if it continues at current lofty levels coupled to hedges for AECO and Euro gas starting to roll off Jan.1.
The only uncertainty - short of a Black Swan - is exactly when. But, whether I have to wait 3 more months (perhaps overly optomistic) or 6 (perhaps overly pessimistic), I expect upwards of $5-600m/yr. (or $3-3.60/sh. with 161.9m shares o/s) will soon be available to allow me to say to all doubters...."I TOLD YOU SO!!!!!"
Regards,
Naamkat
P.S. A post only of interest to those who lean towards the investing style of trying to risk their rate of return rather than their capital.