Kavern Comment on the deal....I am always interested in looking at the metrics of deals...and I would never own Surge shares but I am interested to see how the Surge story plays out.
In my view both Surge and BNE are in the worst shape out of all the companies we follow..I am discounting stuff like PPR...I mean does it logically tell you when Surge and BNE are both heding in 2022...banks forced this...both companies must have barely made the 2020 fall bank reviews...lots of people refuse to accept reality. I guess Petrus could be added to the list. All three of these companies were on "fumes" after Q1...look at the working capital defiencies they all have...you think these three were paying their suppliers early...or waiting to last moment?....hmmm..alot of this a person can critical think if they let the financials statemnts tell them the story.
So from Surge's perspective...possible they needed the cashflow from Astra to make their next bank review.
Let's be real folks, Surge Q1 drilling program are not wells that hum that high in Q3 and Q4 of this year...those sparky wells may be cheap and are economic but they are not long life...viking or any of that sparky heavy oil doesn't have wild high reserves.
I can see why Surge wanted to do this deal even with the dilution.
The puzzling part is why would Astra accept this deal. Astra doesnt have banks pressuring them..they have the CF easily for the debt they carried and the current production rate would not have that much flush production...it probably doesn't take much sustaining capx at their current production rate.
Astra (private company)..good assets and valuation get bought by Surge....Venturion same thing...good little company that wasnt burried in debt bought by Cardinal for cheap using shares...both Astra and Venturion accepted this deal because I think the market to sell out as a private company is not existent still...because of the high cost of capital still and just even ability to get financing.
The dividend model is the only way any of this good private companies are going to unlock their value with such a brutal M&A market. New explortion and new public offerings are just not happening.
Seeing the "milk the assets" model.
I think 5000 BOE is worth more on the stock market then if company was a private one with that for sale.
Astra and Venturion both know their companies are worth more...so they are probably hoping they can get a dividend eventually.
The stock market provided some of the owners liquidity and some may stick to see if companeies can eventually pay a dividend by getting bigger and married with a larger company..
Astra assets are perfect in a divy model...but how many public companies would be interested...4,000 is tiny for any of the big guys. Bidding pool probably small.
I also think this "type of deal"..a private with good CF looking to merge...is BNE best option to make it through bank reviews.