Regal Partners Ltd V.RPL

RE:Independent Analysis of Asset Sale to Surge?

[Seppelt]

I may agree with you: "Selling SE Saskatchewan assets seems to make little sense..."

Viking are low cost, shallow wells. Individually they can be profitable but low production rates and declines seldom support a dividend model. SE Sask. are mature, low decline wells that produce free cash flow. RPL, SGY, TOG became dividend payers by purchasing these assets from majors: Penwest, Cenovus and Pengrowth. All transactions went well except RPLs - we know the story.

I thought, RPLs can de-leverage gradually. Interest rates are very low and won't rise a lot for at least 2-3 years. Enough time to lower the debt using cash flow and equity. Hiring a strong CEO and cutting costs, mainly above average G&A, would bring some confidence and stronger share price. This would allow further debt reduction by issuing equity. 
Some investors here already posted that gradual recovery would suit their goals as long as they get the monthly dividend.  

The recent deal was probably fair for both sides... Except, SGY has a CEO with an ambition to grow the company while RPL has no CEO, it has a large board with no stake in the business, a special committee and consultants. It is now a much smaller company with reduced production and cash flow. The debt is lower and so is the bank line.