RE:RE:RE: New face at the window Cormark Securities have been steadily on the buy side of CKE for the past week or so. On an average day, they have accounted for about half the TMX trades in CKE. Wildstar82 wondered, as I do, who they are acting for. Add to that CKE CEO Walter Vrataric also just bought 30,000 shares. Because of the insider trading rules, it seems he does not know either.
Cormark has been a central player in many of the Montney deals which have gone down the last two years andin the process have acted for and with several companies. Here are a couple possibilities as to identity of the mystery buyer of CKE shares.
SPROTT
Cormark used to be Sprott Securities and still have ties with Sprott Investment managers. Sprott has a small hedge fund - Sprott Resources Holdings (SRHI) with just one energy stock - InPlay Oil (IPO). Maybe they want to diversify a bit.
PAINTED PONY, BLACK SWAN AND ALTAGAS
Cormark acted as co lead underwriter for Painted Pony in their 2017 acquisition of UGR Blair Creek in Montney.
Painted Pony has a 20 year agreement with AltaGas (ALA) to process their NG and NGL production. Problem is that Painted Pony is low producer of NGL (about 7%). Maybe they want to improve on that ratio by picking up CKE - which has about a 12 -15% ratio.
Neighbor Black Swan also has a similar agreement with Altagas and in this case it is probable that the dormant CKE 55K Aitken Creek 12 pipeline would add significant value to that partnership.
Cormark does not appear to have acted recently for Black Swan but they have for Altagas. So fantasize this.
AltaGas acquires CKE and keeps the 50K Aitkens Creek pipe line, the two gas processing plants (value to ALA say $50 million) along with the $327 million of deferred tax credits (value to ALA say another $50 million). ALA then spins of the land and existing wells to Black Swan and / or Painted Pony for at least a further $50 million. That would put a value on CKE of about 70c a share and everyone picks up a bargain.
VELVET
Velvet Energy Ltd. is a privately held production company based in Calgary. They have some strong institutional backers who count the long term in years rather than months. CKE could be an ideal candidate to add to their portfolio.
Cormark acted as financial advisors to Iron Bridge in opposing Velvets recent unsolicited and reputedly “low ball” take over bid. Bison Interests, the then principal shareholder in Iron Bridge, led the fight opposing it. Bison is presently a principal shareholder in CKE.
As Velvet won that battle - maybe they they now feel comfortable taking a shot at picking up CKE on the cheap.
Ever since the MacMahon processing plant outage, the mood at CKE has switched from infectious enthusiasm to morbid malaise. CKE neighbors were all to a degree effected by MacMahon. However they all seem to have succeeded in putting the incident behind them and are back in good spirits with increasing production. CKE, by contrast, is still gnashing its teeth and renting garments or whatever it is they down at the Petroleum Club on a bad day. They just seem to be giving a good impression of soon closing shop.
To my mind our Chairwomen at CKE , Ms. T Jill Angevine, needs to get proactive about this situation. Better this than CKE suffers the fate of Iron Bridge shareholders.
By my rough calculations, even in this gloomy market, the break up value of CKE (at Sears closing down sale prices - cash and no returns) - could comfortably fall between .60 to .80c a share - maybe more. But - this value could only be realized if CKE assets are properly disclosed and exposed to the market before being sold off separately. IBR and Velvet could not agree on a disclosure agreement so Velvet just went ahead and made its low ball bid without it. A lesson to be learned here?
If CKE shareholders are to get maximum value, our Chairwomen’s first call then should be to Peters and Company with the instruction to explore “strategic options” again. Tell them their competitor Cormark is sniffing around - that should stir them up.
Second option would be to explore a friendly merger. We have three neighbors who all could be candidates. Storm, Suagaro Resources and Black Swan. For starters Ms Angevine, why not pick up the phone and invite Stacy Knull, CEO of Saguaro down to Tims for a double double and a fruit explosion - your treat. Just say “We need to talk” and he will be there. With all the general uncertainty ahead, some of his investors may want to get a little more liquid and a TSX listing would help. His number is 403-453-3040.
At then end of the day, one or both of the principal shareholders in CKE will have the final say.
Bison Interests has a 12.2% stake in CKE acquired in early 2017. Bison is a hedge fund based in Houston TX with about $80 million in assets. It focusses on junior oil and gas companies with an equal split between Canada and the US. Given the roller coaster market, their picks seem to be doing quite well. Their investment in Iron Bridge appears to have broken even as did their investment in Ikkuma. Journey Energy (JOY) is presently their main focus in Canada and on this they seem to be slightly ahead. The dog in their portfolio is however CKE which they bought at about 31c a share. Like their fellow shareholders they must be get a bit edgy about it.
At the end of the day, the play will be called by Alberta Investment Management (AIMCo) who conceived Chinook back in 2010 and have 35.9 % interest. As AIMco votes elect the Board, they presumably play the hidden hand behind its management. It is probable they also concocted the idea of a New Chinook in 2017. Old Chinook came onto the market at about $3.00 share and New Chinook at birth was trading at about .50c.
When it comes down to decision time, does AIMco, as a Crown entity, feel any responsibility to do a deal which is in the interests of all CKE shareholders - or only themselves.
Who knows?