Elkwater Resources' (ELW:TSXV) stock price is sitting in a unique position. It is trading near a 50% discount to where its approximate $90 million financing was closed less than 30 days ago.
That is rare in any market as a certain set of circumstances must be present for such a potential discrepancy to exist. Obviously, weak oil and gas prices are likely playing a factor.
The newly formed oil and gas company, which has just acquired operating production in the Killam area of Alberta, continues to trade at a huge discount to a recently closed financing. On October 29th, Elkwater Resources secured roughly $90 million via the issuance of 240,000,000 shares at a price of $0.375 per subscription receipt.
Elkwater's share price hits $0.175 Tuesday morning
Interestingly enough, Elkwater Resources' shares hit a low of $0.15 on November 10th. Eight trading days prior the stock had hit a high of $0.365.
A syndicate of Underwriters, led by Desjardins Capital Markets, TD Securities Inc. and FirstEnergy Capital Corp. participated in the private placement. Co-Lead Underwriters included Dundee Securities Ltd., Clarus Securities Inc., National Bank Financial Inc., Canaccord Genuity Corp., Cormark Securities Inc., GMP Securities L.P. and Scotia Capital Inc.
Additionally, a few insiders also participated and purchased 3,033,334 shares according toinsidertracking.com.
Doug Baily, Elkwater's President and CEO, picked up 266,667 at $0.375 in the equity raise, according toinsidertracking.com.
On November 13th the flow-through offering for the remaining $10 million was complete at a price of $0.42 and $0.45 respectively.
Elkwater Resources' stock had traded some 2.1 million shares, valued at approximately $400,000, by 1:05 PM EST Tuesday.
On October 15th, Elkwater announced that,
"Upon closing of the Exoro Acquisition and the Killam Asset Acquisition (collectively, the "Acquisitions"), Elkwater will have a concentrated asset base of high netback, low decline crude oil and natural gas assets, which, along with its strong financial position and significant financial flexibility, will position Elkwater to continue to execute on its strategy of high growth through development and exploitation drilling and further consolidation opportunities."
Click here for more info on the previously announced acquisition that has now closed.
This is effectively what Elkwater has done after it announced on November 20th that both strategic acquisitions had been completed.
The company previously reported that the, "Exoro Acquisition adds an aggregate of 1,950 boe/d (60% oil and NGLs) of operated production."
And that the, "Killam Assets add an aggregate of 525 boe/d (60% oil and NGLs) of operated production in the Killam area of Alberta. The Killam Assets include 5,760 gross (5,440 net) acres of land at an average working interest of 94% and access to wholly-owned infrastructure."
Click here to read the entire press release.
These acquisitions give Elkwater immediate production and significant acreage.
Below is an excerpt from last week's press release.
Pursuant to the Arrangement, Exoro shareholders received, at their election, for each Exoro Share held, either: (i) 3.47 common shares of the Company ("Elkwater Shares") (at a deemed price of $0.375 per Elkwater Share) and 1.735 Elkwater Share purchase warrants ("Warrants"); (ii) $1.30 in cash; or (iii) a combination thereof.
Click here to read the entire press release.
Needless to say, Elkwater is not trading anywhere near $0.375 per share at the moment.
Elkwater Resources has continually been among the most heavily traded stocks on the TSX Venture as investors fret over its valuation. On November 10th, Elkwater traded some 11.6 million shares worth more than $2 million and declined to a low of $0.15 per share. It eventually closed down 5% to $0.18 per share that day.
Elkwater came to trade under its new banner in mid-summer. Within a few months it had hit an incredible high of $1.46 per share. One look at the below 6-month chart tells the story.
Elkwater Resources – 6 Month Chart
Elkwater Resources' market cap drifted below $50 million Tuesday to about $49.2 million.
It’s now up to company management to turn two strategic acquisitions into two profitable ones. Many oil and natural gas stocks have been hammered in recent months, but few juniors on the TSX Venture are trading some 50% below where they recently raised roughly $90 million.