RE:RE:Merger is a defensive action by PPY There probably is a certain amount of truth to both comments below.
1.) That this was a means to fend off a low-ball acquisition of PPY by a competitor.
2.) That this will allow management to be entrenched for longer, etc.
But I also believe that there also was a third reason for this deal. PPY was over-extended and needed to raise funds quickly or it would be in financial difficulty. By doing this deal it bought the company time to get its financial house in order and bring down its financial metrics to align it with the metrics that the lending syndicate required.
That is the cynical take (including the two other person's comments).
I also believe that it also is a vote of confidence in the future.
It is doubtful that the company management wanted to roll over and let the financial syndicate force it to bring its metrics into order in a low price environment.
There is a lot of things that are happening in the Montney right now that are going on that bring hope to producers in the area.
1.) We look at other unconventional shale assets around North America (Permian Basin, Utica Shales, Bakken, Eagle Ford, etc.). These plays are where the money is right now, and it is not just small otatoes money. This part of the Montney is just opening up and there are some huge deposits that are being found in the Montney shales, both in Alberta and BC.There is serious money being spent developing unconventional shale deposits across North America. The Montney, by the looks of it, may have one of the biggest assets of all the unconventional shale areas.
2.)Gas has been in a slump for 10 years and there are signs of hope in the patch for the first time in a long time.
3.) Infrastrucutre to move the gas out of the Montney is moving forward, and there is the political will (finally) under the current governments to make it happen. In the last month there have been some big announcements of infrastrucure builds and plans from companies such as Pembina Piplines, TCPL, Petronas, Shell along with First Nations partners who have not always been the most cooperative. For that you have to thank the Liberal and NDP governments in Canada, Alberta, and BC that have actively sought to include these partners into moving these projects along. In the deeply Conservative Calgary oil patch this is very much not a popular viewpoint. However, this is reality, not political axe grinding or sour grapes. What did the last Conservative governments do in this regard? Sweet F All, but it was certainly not for lack of trying on their parts.
This is the framework that this deal came together in. We know there will be some serious consolidation in the Montney in the next few years. Some deals have already happened and more will continue. Many of these deals are being done because the pockets of the producers are not deep enough, or they hit the wall financially. It has been a tough go during the financial trench in gas prices for the past ten years, and the local economy has certainly felt the effect of this long low price environment. From a company perspective, without infrastructure builds to get the gas out of the region. there is little cash flow to explore or develop their assets (and for that matter keep staff levels up). It is a ripple effect.
Now entering this current situation, we see that ARC who is one of the contributing partners in this deal are some of the smartest money in the Calgary oil patch in terms of developing assets. They, along with UGR are private capital investors. They are seeing the same situation that PPY management was seeing; 1.) a vulnerable producer; 2.) a lack of a controlling block in the company; 3.) new infrastructure builds in the region; 4.) consolidation in the region; 5.) financially weak producer; 6.) a combination of forces to combine strengths and weaknesses to benefit everyone (of course they also are looking out for themselves).
Overall, this deal is probably a smart move for everyone as it 1.) buys time for gas price recovery (it is cyclical afterall); 2.) strengthen each companies balance sheet to develop the assets; 3.) create a company that is big enough to attract a major for acquisition (and provide a financial exit to develop the next asset.
So I believe that this whole deal is a vote of confidence in the region and that gas prices will come back, notwithstanding the short-term financial pain.
ceremony wrote: nobody is going to come in and low ball. the reason management did this is self preservation. it leads to a longer runway. a longer runway allows management lots of time to collect high salary high bonus and lots of stock options. they get rich whether their sharholders do or not. just look at the last 5 years fo compesation and see how they are doing and how "you" are doing. this deal has zero to do with creating value and everyting to do with linging pockets. it's clear they bit off way more than they could chew with their original 2017 plan. they could not execute that plan without new capital. So this is their solution. they did the bought deal and now they are getting more assets to run through already contracted Pipes and Plants. and you just saw the options gettting issued at the "lows". unfortunately this is easy to do up north. nobody is "watching". lookj for teams that walk the walk. not just talk the talk. I know of a few in canada.
Valuecan wrote: Hello,
I have been been trying to figure out why PPY would dilute shareholders
when it's stock is trading at such a relative low price. The management
info. Circular indicates no 10% holders. Therefore the company is a sitting
duck for a lowball takeover. By bringing in the new shareholders with a big
enough position to block a takeover, the company will be protected from a
Lowball bid near term. The only question is will another company see this tactic
and come in with a takeover before the vote?
Just my opinion as a current shareholder. I haven't decided which way I will vote.