Big opportunity being missed
I am buying right now at this level of around $4.10. Why?
Value is obvious with FCF yield of 31% and FCF/EV of 12%. It is cheap on about all metrics you can look at while things are getting better: G&A, Opex, capex, number of shares, debt, etc.
What is being missed today IMO is the statement that they are in their 2nd round of bidding for their infrastructure asset. So this is close to being awarded.
They gave some additional disclosure or $50 million in annual cash flow. Using that and looking at what the industry is paying for such assets, we can see a very interesting sum of $400 to $600 million.
Yields with stability are in very high demand and such asset offer it. Just take a look at the resurgence of Altagas for example and its spinoff.
There is also 20,000 boe/d of high quality light oil asset for sale in SE Saskatchewan. I don't think it is crazy at all to assume $500 to $800 million for these. Finding buyers with available capital must be the largest difficulty and not the values that I am assuming. This is cheap really.
So we could easily see a reduction of $1 billion in net debt with only 12% in overall production. That would put debt concerns to rest once and for all IMO. And if we only see the infrastructure sale for now, we could retain the 20,000 boe/d and produce more cash flow.
Either way something does not add up with this market. We have oil up and all Canadian energy stocks are suffering today. So not CPG specific for sure. Trudeau disease, Soros/Rockefeller further attacks, eco-terrorists, whatever is the cause I would think that someday things will normalize. They have to.
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