Ms. T Jill Angevine - time for 15 minutes Given the volume and spike in share price we have seen this last week, it would seem that CKE is finally “in play” Given what seems to be a blatant manipulation of the price last Friday at close - down over 15% in the last hour of trading - it would appear that whoever is after CKE, may be aiming to get it “cheap”.
The big question is whether the acquirer will show their hand before of after CKE second quarterly report - due August 9, 2018. That quarterly report could be a game changer.
In Q1 2018 CKE reported a net loss of $2+ million on average daily production of 2,788 boe/d - the reduced production being a result of CKE being unable to ship product due to third party restrictions. Compare this to Q1 2017 when CKE was able to ship 3, 514 boe/d and showed a $10+ million net profit. Q2 2018 shipped production could average over 5,000 boe/d (could even reach 6,000). In that case, net profit for the quarter could easily exceed $15+ million.
On this vital issue of secured commitments for shipping, CKE shareholders and the market are being kept in the dark. Compare CKE disclosure on this situation to that of its immediate neighbours - all of whom share the same challenges.
Here is how those companies addressed the problem and how they have reported it to their shareholders and the market.
Black Swan Resources
Presentation July 2018 - Page 13
Egress grows to >390 MMcf/d
• Option to flow up to 100% on TCPL by 2019 • Long term >2/3 of egress on TCPL with access to AECO and beyond
News Report - March 20, 2017
Black Swan energy announces long term egress commitment
Black Swan Energy is pleased to announce that it has entered into a long term commitment with TransCanada Corporation, for 229 MMcf/d of service on the North Montney Mainline for transportation on the NGTL system, with an expected on-stream date in Q2 2019. This service relates to the recent announcement by TransCanada in which they confirmed they are seeking approval to proceed with the North Montney Mainline Project.
Black Swan has also secured 20 MMcf/d of Alliance capacity starting April 1, 2017, with volumes being delivered from Black Swan’s North Aitken gas plant. Including the new contracts, in 2019 Black Swan will hold over 395 MMcf/d of long term egress, which provides capacity for ongoing development of the company’s Northeast British Columbia (NEBC) Montney asset and enhances visibility of its long-term growth profile.
Storm Resources
Q1 Report - Hedging and Transportation - Page 6
Total firm transportation capacity increased to 102 Mmcf per day in April 2018 with the addition of 13 Mmcf per day of capacity to AECO. Firm capacity on the Alliance Pipeline to Chicago totals 55 Mmcf per day with preferential interruptible capacity increasing this by 14 Mmcf per day (increasing total transportation capacity to 116 Mmcf per day sales). Using firm capacity of 102 Mmcf per day sales, approximately 54% to 68% of natural gas will be sold at Chicago pricing, 11% at Sumas pricing less a marketing adjustment, 5% at ATP pricing, and 16% to 30% at Station 2 or AECO pricing. During the first quarter, 64% of natural gas production was sold in Chicago. Natural gas production exceeding firm capacity would be directed to Chicago and/or Station 2 using interruptible pipeline capacity (depending on which sales point offers a higher price net of transportation tariffs).
Presentation - July 2018 - Page 16
Transportation commitments provide sales diversification
Alliance @ Chicago 55m
Alliance IT @ Chicago 0-14
Alliance @ ATP 5
Spectra @ Stn 2 17
Spectra @ Stn 2/Sumas* 12
Spectra/TCPL @ AECO 13
102 -116 mmcf/d
*physical sale at Stn 2 for Sumas price -US$0.69/mmbtu
Saugaro Resources
Presentation - May 2018 - Page 24
Third Party Processing
Currently connected to three third party processing facilities
Contracted firm service: 70 MMcfd
Executed a competitive processing agreement to manage mid-term production growth up to 130 MMcfd
Significant interruptible service is also available
Transportation
Firm service on Enbridge T-North pipeline expanding with processing commitments
Firm shipper on TCPL North Montney Mainline project (in- service ~2019) and Enbridge T-South (in-service ~2020)
Additional expansions planned for NGTL and Alliance systems
49 km 6” condensate pipeline from Saguaro’s facility to a new truck terminal on the Alaska Highway under construction
On schedule for start-up in Q2 2018.
Now take a look at what management at Chinook has seen fit to dish up to their shareholders.
Chinook Energy
Q1 MD&A Page 6
The Oak Pipeline has now been temporarily replaced. As a result of our Birley / Umbach facility expansion, with this third party restriction eased, our production volumes have increased. This is expected to further lower, on a boe basis, the contribution from fixed operating costs relative to total operated costs. There are also no significant scheduled McMahon Plant turnarounds. We do not anticipate significant maintenance costs on our operated facilities.
Presentation - May 2018 - Page 13
No material contracts or near-term Montney expiries allows us to be fiscally prudent during depressed summer gas prices in the short term and to benefit from future egress options available in NEBC.
AND THATS IT FROM MANAGEMENT TO SHAREHOLDERS AND THE MARKET ON THIS VITAL ISSUE.
This is simply unacceptable. Either management has secured commitments which would enable them to ship through or diversify away from McMahon gas plant for processing and Station 2 for pricing or they have not. The amount that has been hedged tells us nothing. These hedges could be money losers if CKE cannot deliver on their contacts. If all of CKE neighbours (some of them not even listed) can make proper disclosure on this vital issue - why CKE failed to do so? What is stopping them?
The net result of this lack of information is that insiders - and that includes Management - at this critical juncture have knowledge not being available to shareholders and the market. If a “low ball” bid is made for CKE this information is essential to attracting a counter bid. CKE ordinary shareholders will inevitably be the losers if it is not. At this time there is every reason for them to disclose this information and no excuse for CKE not to do so.
The Chair of CKE is traditionally expected to protect the interest of shareholders. What is she doing about this manifestly unfair situation at this critical juncture when every day counts. Is the the fate of CKE shareholders going to be left to the whim of management or are they going to fairly and properly treated? Its up to her now to intervene.
If you agree, then speak up. Contact our Chairwomen, Ms. Jill Angevine or simply send her a copy of this post. Let it never be said she was unaware of this situation.