RE: RE: Calculation ballpark Cashflow or profit from a barrel of oil is NOT equal to that from a BOE of gas. The production rate conversion assumes a 6:1 gas to oil ratio. Meanwhile, current cashflow from a barrel of oil is about 15:1 or higher than a BOE of gas, and from a profit or netback is even higher. Dry gas generates very low returns or perhaps even a loss. Oil and the liquids portion of wet gas generates the profit. Be careful when quoting such metrics without the proper context. You only need to look at the metrics for a gassy company to see the impact of this relative to an oily company.
The main technical reason for me being AGAINST the Guide deal is just this very fact, since now I need to hope for gas prices to do well whereas before I just needed to hope that oil prices would stay reasonable. The merged entity carries far more risk, and I would say we have a managment team that will NOT understand how to manage such risk. I fear that they will raise more capital and gamble.
Westfire was growing at a rate in excess of 20% per year, and surely that should have been good enough for the shareholders since the downside was very limited based on their technical progress. The risk / reward ratio for the merged company is simply not as attractive for me and I will look elsewhere to deploy my capital when the time is right to pull out.
The time to pull out will be when the cheerleaders start to pump the merged entity, and hopefully drive the SP upwards to $6/sh by Feb. However, I worry that this will not happen owing to the Guide anchor. Let's HOPE for strong gas prices this winter, since unfortunately we NEED that now to get out at a more fair price.
Let's hope the global economy does not go down the tubes, or we be stuck with this beast for quite some time, and we may find that we are in deep cashflow challenges.
Let's hope the new management will NOT screw up the Viking success, and that they will invest ALL cashflow into growing OIL until gas prices improve substantially. They have the leverage to do that, but unfortunately may have lost most of the technical talent to do just that.
I would guess at least 10M shares will need to be dumped, and probably more like 20M of the float in order to eliminate unhappy shareholders. I wonder if Sprott or Cadent will buy those up or let the SP continue to flounder. What a mess ...