At its peak we were worth $120k per flowingToday CPG can swoop in and purchase those same bbls for $60,000. A table pounding bargain compared to 6 months ago. Im going to re-calculate the math here since I screwed it up last time.
So to buy the 21,000 bopd at $60,000 per flowing would get $1.260 billion-($879 debt) = $381 million left over.
Distribute $300 million to shareholders or $1.50 per share ($300 million/200 millinon shares outstanding). Keep $81 million for newco that is now debt free.
Newco can exit the year at 6,500 bopd. Which assuming a valuation of $50,000 per flowing would be worth $325 million. ($325/200) = $1.63.
$1.50+$1.63=$$3.13 value. Current stock price $1.54. Upside 109%.
Why do I go with $60,000 per flowing? Because that is the lowest price I think CPG can get away with. Their compeition SGY is currently trading at around $55,000 per flowing. So they need a high enough number to make other bidders go away.
Now lets say CPG pays $65,000 per flowing instead. Each $5k increase per flowing gets an extra $105 million for leg or an additional .53c per share. Now why would CPG buy LEG here? WATERFLOODS. Unrealized upside. In fact the Waterfloods could add over $2 billion in unbooked value over the coming years to the reserves. They can see this potential and so can I. This is perfect for the divco model. So I don't think LEG can last down here in the $1.50s...You will begin to build in a takeover premium and I think it goes to $2s in the next few weeks on that.