RE:Transformation continues, Gas Handling Deal, ALL TournamentGeorge98 wrote: Consolidated balance sheets are not easy for the inexperienced investors to figure out. So:
1) In early Q3, CKE made a NEW Gas handling agreement for its Montney production in Birley which improves further costs, drilling economics and pricing. Significant development.
2) ALL the Tournament shares will be distributed to CKE shareholders. Another significant development. So by buying CKE now at $0.51 you get:
- 70% of Tournament whose estimated enterprise value is about $200 million based on its 5,041 boepd production capacity and its 21.26 MMboe 2P Reserves. See CKE news as of June 2016.
AND
- CKE, as a pure Montney producer now with 2,700 boepd from Montney and 18.3 MMboe of 2P Montney reserves. See CKE news as of June 2016.
3) Pro forma the Tournament deal, CKE's provisions are now just $32 million and Tournament has the remaining $80 million provisions.
4) CKE has an eviable balance sheet and is debt free with $21 million net surplus and about $25 million cash.
5) Tournament has about $3 million cash and just $18 million debt.
6) To estimate CKE value ONLY for its Montney production and 2P Montney reserves ALONE, bear in mind the key metrics for the other Montney juniors that are also DEBT FREE, same like CKE, and drill next to CKE:
Blackbird (BBI) trades now at about $100,000 per boepd and $20 per boe of 2P reserves.
Leucrotta (LXE) trades now at about $100,000 per boepd and $16 per boe of 2P reserves.
Riverstone Seneca paid $80,000 per boepd for privately held CIOC that drills next to CKE in Gold Creek in January 2016.
Keep in mind one more very recent Montney deal in Alberta.
Seven Generations (VII) bought Paramount's (POU) Montney assets (heavily natural gas weighted) in Alberta for C$1.9 billion, including debt.
Specifically, VII bought 30,000 boepd and 293 MMboe of 2P Montney reserves from POU.
So VII paid C$64,000/boepd and C$6.5/boe.
Also, don't forget that POU was a distressed seller, POU was a beggar because of its sky high debt. Its lenders wanted their money.
In contrast, CKE has a stellar balance sheet. Same like the other DEBT-FREE Montney producers u mentioned above like BBI and LXE trade at C$100,000/boepd and C$16-20/boe. So CKE can definitely get these premium metrics too.
But even if CKE gets C$70,000/boepd and C$7/boe for its Montney production and 2P Reserves, it translates into about C$0.90 per share. And this does not include the ADDITIONAL value from Tournament's shares, once Tournament goes public in 2017.
Because Tournament's value is not zero. And also once Tournament goes public in 2017, oil prices will be much higher than today.