Lightstream Resources Ltd. LSTMF

Weekend Speculation

[JohnDD]

So there has been some talk about a potential takeover. But who would be a candidate and why?

One possible contender could be Vermillion. Why you ask? Currently Vermillion has a meaningful position in the West Pembian Cardium producing around 10,000 boe/d this year and looking to drive that higher.

Lightstream is production just under 20,000 boed in the Cardium - mostly in west pembina. Not sure how close their lands are, but there would be some efficiencies to be had in both the field and adminstratively.

So that provides a strategic fit ......

Tthe other big dirver is that Vermillion is trading at a valuation around $170k/boed, versus Lightstream at around $70k/boed. There are benefits to shareholders from both companies to do a deal. As a former shareholder of Vermillion (who sold to buy LIghtstream years ago - very bad call) I would be hasppy to take Vermillion paper and some cash. 

Lets look at some numbers. If Vermillion was willing to pay $110k/boed - seems like the going rate these days.. Lets further assume LTS producing around 38k boed per day.

That would cost VET around 4,180k ($110k/boed *38k boed).

So 4,180k, less debt of 1,500k - i will add about 100k  to purchase the ~13 million in LTS options currently on the books - so that works out to:

4,180 - 1500 +100 = 2,780/213 million shares = $13/share.

That sure would be nice.

Vermillion could turn around and sell the entire Bakken acerage to CPG for around $1,650k (15kboed * $110k/boed). The net cost to Vermillion would be $4,180 - 1,650 = $2,530 or $2.5 Billion. Definitely a lot but doable.

This would be a win/win for all.The LTS assets move to a firm with proven capabilties to execute and create shareholder value.. I would think this acquition would work for Vermillion shareholders - and get enough support from LTS shareholders & BOD at this price.

That said..... pretty hard for VET to offer a premium of more than 100% of LTS's current share price - poor optics. So even though Vermillion may want to make a move they may have to wait for LTS's share price to get to something more reasonable otherwise Vermillion's management looks they overpaid. Maybe something to look forward in 2015 if Lightstream can execute better and improve their share price to something closer to $8 or $9/share....

Has Vermillion already approached LTS?? Could this be a reason JW is buying Spyglass shares rather than LTS - where he is the president - he simply can't buy LTS with this knowlege?  Pure speculation OR wishful thinking on my part... 

Here's hoping and praying...