Connacher Oil & Gas Ltd CLLZF

Parnership - warning for DG

[leveraged1]

 The way I look at any major transaction involving a company like Connacher ( share issue, sale of assets, patrnership, joint venture or wahtever) - from the perspective of the common shareholder - is ALWAYS :

Immediaite short term pain in exchange for "the potential" for long term gain.

The most recent example was the sizeable share dillution to permit the completion of  Agar. Shareholders lost substantial value immediately which is now comming back as their hope ( Algar's completion) comes closer to  reality. The same will likely happen if there is a partnership deal. Some aspect of shareholder value will be given away to the new partner and shareholder value will drop immediaitely. That value MAY come back but only if the potential for further growth with a new partner proves itself to be a reality later on.

So no matter what form the major transaction takes - common shareholders are always the "immediate" losers of real value in exchange for some kind of hope. The problem as I see it is every time "the hope" purchased by the common shareholders comes closer to a reality - there is some new major transaction announced
which prevents the shareholders from ever fully cashing in on what they purchased in the last time.

Yes shareholders get some value- but never the full amount - something is always skimmed off in every major transaction: be it by anti dillustion provisions in favour of management, options granted to purchasres, rights offerings in favour of staff , management contracts in favourof management or sweet deals to joint venture parties 
for  whatever they can provide the deal maker in exchange.

No wonder the share value goes down whenever someone smells or gets wind of the next major transaction irregardless of its nature. The really unfair part is that the immediate take - at shareholder expense - is always " risk free" whereas the subsequent task of turning their "hope" into gain, purchased by the shareholders, is always fully at their risk. 

The trick for management is not to skim, too much too often,o no one really notices it or if they do  - they don't get too offended by it. If value is always being skimmed off their  may still be growth in shareholder value just slower growth than the industry average - eventually people give up.

A warning for DG when negotiating the next major transaction - joint venture - CLL shareholders have been watching and believe it is time they participate more fuly in future gains. Their patience is running thin when it comes to any mechanism employed to reduce their immediate interest for someone elses gain.