The impairment and..... "At December 31, 2012, due to declining forward oil prices, the Company tested its CGUs for impairment." "At December 31, 2012, it was determined that the net book value of one CGU exceeded the recoverable amount and Renegade recognized an impairment charge of $21.6 million. At a future date, if there is an indicator that a previously recognized impairment charge may no longer exist, the recoverable amount of the CGU will be reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion, if no impairment loss had been recognized." The price of Edmonton Light (Cdn$/bbl) used in the estimation were 84.55 for 2013 to 104.35 for 2022. "A one per cent increase in the assumed discount rate would result in additional impairment of $31.4 million whereas a one per cent decrease in the assumed discount rate would result in no impairment charge."
I guess this CGU is among the newly purchased assets. Everyone knows the deal was overpaid, probably meaning the property was overbooked. Writing down the book value is consistent with the consensus and I view it as a prudent move. There was no cash involved. And, more importantly according to the company, "the Acquired Assets have performed as expected, with highly predictable cash flows and operating results. Production has been held at approximately 3,600 boe/d with minimal sustaining capital."
The selloff is continuation of the digesting and reacting to the deal by shareholders, analysts and money managers. They never liked the deal. Now they hate it more than ever. They were worried about the dividend. Now they are in fear that the dividend will be cut. They forgot that the operation is just fine. It's overdone. All the emontion created a buying opportunity.