Twin Butte Energy Ltd TBTEF

RE: Dead money

[bshort92]

Joanne Hruska a well regarded money manger in the E&P space was on BNN Market Call tonight. She said to avoid TBE. Says the debt is too high and that the issue might be an entry later but that she is staying away for the next two or three quarters. Loosely translated the technical team and their 89% success rate is not giving off much confidence. 89% on slam dunk, low risk, shallow heavy oil efforts. Come on they can't drill a septic tank. $200 million is too much debt says Hruska as that figure might be OK in the light oil space for say a WCP or an LEG but in heavy oil with the wide differentials and astronomic prices for diluent and a half baked (15%) rail transport option it's clear the midstream and downstream issues are killing heavy oil drillers including TBE. They seem always a quarter or two behind the learning curve just now recognizing that you need to drill deeper horizontals to get higher output wells to offset the base decline. Gear was doing this a year ago. In TBE's case they have gone from 19,200 boe/d to 17,200 boe/d in six months. The share price from $3 to just above $2 and will probably open under that threshold tomorrow or soon as the realization that the Cushing glut will send WTI to $75. It's always a blind siding, downer in the works. Management is probably over rated riding on past laurels and incapable of creating value for shareholders. Sure the dividend can sustain but at the price of the shares trading lower mitigating all upside. By the end of the year you can collect the dividend but if the shares are at $1.50- $1.75 it's a losing proposition. Everytime a caller asks a John Stephenson or a Bill Bonner or a Michael Decter on BNN about TBE it is always about if the dividend is sustainable when the better question is can they grow 3% to 5% like they say and the answer is an emphatic no they can't... they are contracting. They are selling assets not aggregating or consolidating their footprint in and around Lloydminster. The clincher to this rotten investment is it could have been avoided but the plan went south as the operational issues were not managed. It is too late to sell the firm as it is doubtful they can get $25 to $30 K per flowing boe themselves. They bought Sprott out in the Waseca deal and then they bailed once the deal closed. That is all one needs to know. Now the bagholders are the shareholders who think TBE can grow despite losing over ten percent of its prodcution and a third of its value in the last  six months.