Eagle Energy Inc T.EGL.UN

Selfish management

[Ogopogo26]

I used to be a shareholder but sold out last year. I actually had lengthy conversations with their CFO before, challenged them in the earnings calls and came to the conclusion that management is primarily interested in maintaining their jobs (and compensation) rather than looking after shareholders.

The asset sale was undoubtedly positive. They flagged it at a roadshow last spring. They executed well; purpose was to  sell an asset which requires high capex into a low decline/low maintenance asset. They were lucky with timing, profiting both from the oil price drop and US$/CA$ movement. I wouldn't give them credit for that. Neither for the hedging, which is again a management philosophy and makes them look  good now, but not so much if prices had gone up substantially. In any case these hedges at oil prices of $90 will run out by the middle of next year.

What ticked me off when talking to them was that although they announced potential buybacks, there did not seem to be any intention to follow through. I explicitly stressed that from a shareholders' point of view, they should not rush into an acquisition, but again this was ignored. They could have put a floor of $2 under the share price easily, even without major buybacks.

From an investor's point of view, I don't like that management philosophy and have to ask myself, if oil prices go up again, whether Eagle will be the best oil investment to hold. They are better positioned and more prudent than many other firms in the oil space right now, but they would not be my first pick in a recovery scenario.