Twin Butte Energy Ltd TBTEF

Heavy oil M&A

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By now any intelligent investor in TBE has read the article in Motley Fool describing TBE as being a beaten down firm offering compelling upside. The article implied TBE as extremely undervalued and a comparison is made to the current valuations of Canadian heavy oil heavyweight BTE and US based (Denver) heavy oil producer BRY-Berry Petroleum. When the article was penned BRY on the NYSE was trading at $91 K per flowing boe/d. Today BRY producing 39,500 boe/d 49% of that heavy oil was sold to Linn Energy for $2.5 billion. The firm also had 2p reserves of 360 mmboe. On the M&A front a suitor will seek out a firm's production: in TBE's case 17,800 boe/d about 90% oil. They will also consider a firms land base in TBE's case in excess of 400,000 acres of which 220,000 of it is prime Lloydminster area shallow heavy oil fairway. Other considerations are a firms reserves: In TBE's case in excess of 60 mmboe and probably more once that number is released for 2012 any day now. Of course TBE also has accumulated over $580 million in tax pools. Again you ask the benefit that is explained in the Motley Fool article quite clearly. At the end of the day TBE is paying in excess of a 9% monthly dividend and trades at app. $30 k per flowing boe and has app. 200 million of debt which is under 1.5 times cash flow. Outfits like Linn Eneergy are willing to buy a Berry Petroleum. How many other outfits including Linn are out there willing to consider those transaction metrics in assessing an undervalued TBE?