Long Run Explor Ltd Ord WFREF

RE:RE:changchung sinoenergy down another 8.74% last night

[wilwal]

The first day's decline in Sino's stock was perfectly logical.  It had risen about that much on the day before the halt so it was just taking that back.  Last night's decline starts to raise a red flag and increasing concern about whether or not Sino can raise the funds to close this deal.  In relation to Sino's market cap, it's a big deal.  Their market cap is about $2billionCDN and the enterprise value of LRE is $700-800million.  This one deal changes the whole risk profile of Sino once they put their name on the debt.

They need to come up with $275 million (minus the $20 million they already have in it) and in this environment, that's going to be difficult to raise.  Oil prices are coming back but LRE is mainly a gas producer and nat gas prices are still in the tank.  During the oil sands shut downs, you can't give away nat gas so producers who have a significant amount of unhedged production are going to suffer badly in Q2 until oilsands get back to full production.

The market indicates that it is still confident.  I would read the current trading that investors still expect the deal to go through but there may be another month delay while Sino seeks to closes its PP.  If they thought it was imminent in days, it would be trading a bit higher.