RE:PSH's North Dakota deal at US$100K/boepd and ZAR's ND assetsFalse, false, false: this is just hopeful speculation. If they could get a nice price for the US assets, that would be great, but reality is they are probably just mediocre assets, with limited potential, otherwise we would be seeing a higher share price.
These PSH assets, involve significant drilling potential: Zargon's North Dakota assets, don't have many locations. But perhaps in time, they could prove up more of the locations, and show there is some value. Let's see what the yearend reserves show.
Zargon has been pretty thorough at disclosing their production, in their Sedar filings. So let's summarinze how it has gone:
2017
Q1: 2,579 mboe/d
Q2: 2,500 mboe/d
Q3: 2,626 mboe/d
Q4: 2,416 mboe/d
2018
Q1: 2,427 mboe/d
Q2: 2,118 mboe/d
Q3: 1.953 mboe/d
You can't misleadingly say that the "WCS price has returned to where it was, in the first 9 months of 2017, which will allow Zargon to generate good cashflow", when the production has decreased, due to a combination of lack of maintenance spending, and pooer than expected performance.
It looks like Zargon has a 26% decline rate, based on the latest quarter: that doesn't sound like long-life reserves. So either some capital spending will allow them to regain production, or else there will be serious valuation problems.
There is nothing I would like better, than to get paid out for my debentures, in December, 2019. I am not in the business of trying to sit on stock in troubled oil companies, while they eke out an existence, primarity to keep management compensated, in this difficult environment. So I would like to see some value in the company, but we have to be realistic, and not jumping on false hopes.
Let's see what this week brings: the recent increase in oil price, might be enough to keep Zargon in the game, and allow them to postpone the deal. Or perhaps they could do some combination of cash and shares, to pay the Debenture interest, when it is due, next year.
This week is important, as they need to start getting some voting material out to Debenture Holders, if they want to do a meeting in early January. Perhaps they can postpone, if things appear a bit better. But don't forget the last 2 months, have not been good, when they likely had negative cashflow. So we'll soon see if they are serous about this shares for Debentures proprosal, or want to stall things out, and hope for more price recovery.
The main advantage this company has, is it doesn't have any bank debt. Bankers (especially that greedy National Bank, which has been the worst bank in Canada, from an oil company's perspective, but don't get me started...) would have slit Zargon's throat in a second, to then crush the Debenture Holders in receivership, and fire-sale the Company.
So while we gripe about management, they did do some good, to reduce their bankline.