CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

RE:RE:RE:RE:Violation of the External Communication Policy

[ocean112]

Quick sanity check - how much is NATO worth to a mistream (given that here are a number of players who could maximize the potential of NATO much better than CUS given thier experience and economies of scale).

Current 5.5 Trains = $25M EBITDA
Potential 10.5 Trains = $50M EBITDA
Potential 14 Trains (with CAPEX of $25M) = $78M Annual EBITDA
ADD: Salt Caverns/Condensate/Diluent = $10M = $88M EBITDA
ADD: Synergies (since a midstream can better operate NATO than CUS) = $5M

Total = $93M annually

How much would NATO be worth to a Midstream? = 

1x = $93M
2x = $186M
3x = $279M
4x= $372M
5x=$465M
6x=$558M
7x=$651M
8x=$744M
9x=$837M

So the midpoint woudl be - 4x to 6x - or $372M to $558M.  When Doug mentioned we were seeing valuations on the high end - its likely he meant  6x to 8x its intrinsic value.

Now - think about it - if the idea is to use the proceeds to

a) Pay down debt to 2.5/3.5 X 
b) Buy back shares (since there are activists breathing down his neck to do so)
c) Have enough for an acquisition because WITHOUT an acquisition - there is nothing to replace the growth potential NATO offered (ie. Chemicals is a near 0 growth business)

If he sold it for $200-300M - 

a) Shareholders would scream at him because he just gave away a GROWTH asset with no value in return other than paying down debt.
b) there is no urgency to sell it for nothing since there are plenty of other options to rightsize debt (ie. dividend cut, sell Brazil, etc) while collecting $27-$30M EBITDA from NATO with more contracts to come potentially. 

My guess (TOTALLY a guess - nothing backiing this up - but want to go on record in the event this is what happens  - but the comments below will sound like conspiracy worthy of Kherson)

a) The reason why it's taking a long time? They are hammering out a joint venture agreement.  Why I think that?  If they got the bids end of December - and they are STILL talking to midstreams and 1 E&P - it means the bids were reasonable enought to negotiate with multiple parties.

b) Multiple parties creates a bidding scenario.

c) If they get say $200-$300M upfront to pay down debt, and $20M payment from a midstream for 10 years - that would reduce the capital risk from a buyer while allowing CUS/buyer to participate in potential growth of NATO once oil recoveres while taking care of the balance sheet issue.

d) This would take time to hammer out a legal agreement which is why they plan to announce it end of Q1.  They have NO incentive to prolong an announcement since the market hates uncertainty - so to me - this is a plausible reason why it's taking so long.

Ok - done with my Khreson conspiracy - decide for yourself.