RE:RE:RE:RE:Possible Scenario for Lightstream?When2buy, I agree with your thoughts, except for the following:
"As for reducing debt by selling assets, this is not my preference. I would prefer the company be sold and let a future owner decide whether assets are non-core or not. As for company sale price, I believe given LTS current weak position an offer of $7.50>$8 would likely push a sale through even though I realize most shareholders here would be under water at that level."
First, I am one of those shareholders who would take a bath if the entire company was sold at $7-8, so that strategy would not get my vote. I do support the company's strategy to sell "non-core" assets one by one and here's why:
Lets assume the following:
Current production: 44,500 boe/d (mid point of this year’s guidance)
Current debt: $2,274k - 112k = $2,162.
Undeveloped lands 900,000 acres
Lets assume we could sell all our production at $80,000 per boe/d and any undeveloped lands at $1,000 /acre - here is what I come up with for a break-up value:
Production: 44,500 boe/d * $80,000/boe/d = $3,560k
Undeveloped land: 900,000 *$1,000/acre = $900k
Total break-up value: $4,460k - $2,162 = $2,298k
Value per share = $2,298/200 million shares out = $11.49. Now you can run sensitivities at higher and lower metrics, but I think the above are reasonable:
The above analysis is what keeps me in this stock - and once the share price gets near this break up value of $11.50, I will start to significantly reduce my investment in this company.
In my view one of the things the company does do well is sell assets at solid metrics - problem is that it takes them forever to do so. That said, probably can’t expect both solid metrics and quick sales, so I accept I have to be patient and let this play out.
As many of who have been around for a few years, this company consistently struggles at execution (e.g.: field operations & development, balance sheet management). Therefore, as long as they can sell assets at metrics at over above the above numbers, I would recommend the company continue to sell their assets until there is nothing left!
John