RE:RE:Reply to Retiredcf's query Thought i appreciate the reply & comments TerribleEng, i would have expected one for Mr. RetiredCF not you, but i will oblige & respond all the same. I remember your name from previous discussions in the past, as we've had a pretty civil comminication regarding several topics in this sector, when it was struggling just a few short years ago.
"This isn't an apples to apples comparison. SDE net debt is $138M as of Dec 31 based on their press release for fiscal year end. That number is surely under $100 at this time."
I'll go ahead and quickly disagree with you here, on this point. i'm not sure what you're basing your opinion on that this isn't a good comparison, but this is truly a perfect apples to apples comparison. You will not find better than this. And i base this on the following. First, they're borh in the same industry, they're both similar sized ep's and have somewhat of a simliar production profile operating in more or less the same area. They're practically neighbors, as half of Sparta's production/assets are exactly where HammerHead is. So don't quite get where you've made the assumption that this isn't a straight "apples to apples" comparison. You could probably make a case if this was someone like Crew or Birchcliff, where operations arent in the same area and/or their production profile is drastically different.
As for the debt, you're assuming a lot at this timebut unfortunately nothing is confirmed by the company that debt has been reduced to those levels. So until that is the case, the prudent & wise thing to use, would be their most recent real & "audited" figures. Which in this case is the following, long term debt around $150M & decomm liabilites ~$130M, for which the latter is more critical/impotant debt than the former. That means their indebted for aprox. $300M in total.
"Spartan will average over 80K barrels this year and have 40% liquids this year."
Again, you're ahead of yourself and assuming a lot here. But actual RECENT numbers indicate a different picture for Sparta than what you're trying to paint for the company. As i've stated previously, ACTUAL RECENT figures put Sparta's production mix at only 20% for oil/condy. The rest is NG. So not only what your saying is far off, it would be a FAR stretch for the company to double their oil/condy mix to ovderall production in less than a year. So until the company actually does this, no one should assume these numbers, as it wouldn't give an accurate assessment of the company.
"The acreage that HHRS has in Karr and Gold Creek is directly adjacent to SDE in the oil window."
Yes it is, and that's one of the main reasons why their indirect relationship works so well here and this is truly a DIRECT apples to apples comparison.
"HHRS has 40K bpd of production forecast for this year but is FCF neutral and is required to build out infrastructure on its land."
The first part of your statement is fairly accurate and it remains to be seen if they can follow through and maintain those guidance numbers. The FCF portion is still up in the air and we will not know until financials are released later this month. So until then, no assumption can be made either way on this front. As for infrastructure, that area where both these companies are operating is pretty well built out, compared to other operators. Imo, HammerHead & Sparta's assets in that area are prety much evden on the infrastrucure issue and this should NOT be the main point of contention when assessing value. If this were someone like Crew, you would have a definte point to make.
"They have $280M in debt which for the size of the organization is high compared to peers."
First, we don't know what the exact debt figures are until their first financial are released. But though i agree with the number you've stated, i strongly disagree that this high for them, when compared to peers. There are MANY small to medium sized caps which are in a lot worse shape with debt to size to value. Some names right off the top of my head which afre in this group is Crew & Athabasca. Different mixes, but similar production levels and debt. So your statement is exactly accurate here.
"They also have 30% more shares outstanding as warrants with a strike of $11.50US"
Yes they do. Not sure if it's 30% more, but they do have a lot more than what is stated and we will only get a clearer & accurate picture on that front when their audited qtr is released.
"There is absolutely no liquidity in that name."
You are correct and completely agree with you. So folks who decide to take a position here should take this into consideration, especially when taking a large position. Their Canadian listing is a little more liquid & fairs a little better than the American one. So anyone buying under 5000 should be ok, more than that, you will have spread/pricing issues. But there are valid reasons why this so illiquid right now. First is the restricitve shares/ holding period, which will take time for the shares to be released. Secondly, the insider are all holding, not selling at this time along with being a lot more tightly held by them than other names.
"The value prop isn't as great as you are depicting"
Well, i base myself on FACTS & NUMBERS as they don't lie and give a pretty accurate picture. So you can take from that what you will and it is your pregorative & choice if you wish to dismiss those factors.
"If SDE spun off deep basin at Peytos valuation for that asset and the Montney was valued at HHRS' EV then SDE would be over $3B EV. "
That's the issue right now for Sparta. We don't know EXACTLY what they're going to do or how they will move forward with that "strategic review" process. And yes, i would agree that spinning off Deep basin & keeping Montney would be the right course of action for SPE. But because we don't what they're really going to do, we can't assume or speculate on possible valuatiuon figures. But i did state that Sparta should a alot high than when it was trading just barely over $10 bucks a few weeks ago.
"SDE Montney acreage and production is very comparable to HHRS as a hole entity."
I agree and would even go further than that and state that i beleive Sparta's Montney acreage is much bigger than Hammerheads.
GLTA