RE:RE:RE:RE:RE:in case you missed todays OBE plugI think you need to have a harder look at the financials of Obsidian and Bonterra. Bonterra has real free cash flow; the accountants that I have spoken to question if Obsidian has ever made a dime from operations (up to Q3/2020). They were also leery of Obsidian’s claims of economies. Everyone has been shaving ice-cubes for the past couple of years; contracted costs have plummeted in a buyer’s market; and pushing costs off as long as possible means that they may, in the end, be more illusion than real. The office lease issue attracted derision that I will not repeat. And then there is Penn West’s history; that is could be turned around that quickly wold be good new, but I would want to see more evidence over time.
My professional life included too many shining lights with big-bang plans dominated by promises of big savings without a real understanding of what change costs and how maybe the dumb way we were doing things was because long experience had shown that it was the least dumb (and least expensive) option that worked. Or perhaps I should say that my professional life was being immersed in the hard work of picking up the pieces and paying to put humpty-dumpty back together again after the shining light had moved on. Change costs cash up front. I was in the military, the taxpayers paid; and no one was ever really held to account. That ain’t going to happen here. So I want to know what the costs are likely to be; and how they will be covered. Before that, I want to know what the cash will be spent on, and how that will generate the savings postulated.
So, financing is an issue for me. Both companies have too much of it already; both need what little head-room they have for cap-ex. I don’t see the Banks lending more. Banks are leery; some want to get out now – because they have bought into the ESG con; others because they no longer want any part of the train wreck that Trudeau has made of the Western Canadian Energy industry. Getting them to pony up more on any basis other than demonstrated free cash flow will be a hard sell.
I will also suggest that you are reading far too much into the small moves in share price. “Excitement” is not a word that would describe anything happening in the market right now that is not a Bitcoin bubble or Elon Musk’s latest brain fart. Cynically, volumes and price changes are so miniscule that I am not surprised that the share prices have moved into line with “the offer” in the few days left before it closes. Obsidian has spent a lot of money getting to this point, so there are vested interests that want to make it look as good as they can make it. Not saying that there is any real hanky-panky going on; I suspect that this is short covering and day traders more than anything else. But if “the market” was excited then there would be a lot more trading for position and for promise. Interesting opening quotes this morning as I post this, so we will see.