A small note & small revision.Just a few things to note before the week-end. As not much is going on with Pipestone in general, things ahve been fairly quiet on here, so really not much to say. The only event of significance that could possibly impact Pipestone on some level, was the completion of the "strategic review" process that had been ongoing over at Spartan for close to 6 months. Those "results" were made known this week and they "could" have some material effects & consequences for Pipestone later on in the next 24 months.
In case some don't know what transpired there at Spartan, the company sold off a good poetion of their Montney assets to Crescent Point, which are right below Pipestone's own assets. So on this front, this is VERY material to Pipestone, as Pipe & Sparta are practically close neighbors there. I would have hoped that Spartan would "one day" be a potential suitor for Pipestone, as i did have them as a possibility in my models, but unfortunately things didn't turn out that way and Spartan mgmt decided to implement their partial "exit" strategy much sooner than i expected. As this more or less eliminates Spartan from any futher M&A in Pipestone's neck of the woods, it also reduced the potential suitors & M&A opportunities for Pipe.
So to keep things short here, the crux of the deal between SDE-CPG was for ~34K boepd for aprox. $1.7B or ~$50k per flowing boe. I will use this metric here, instead of reserves and/or land package, as those factors are less important in this environment than in the past and the former is more crucial imho. So if we use this as a base measuring stick, which is ideal because of the close proximity of their assets & some similarities in their production (in which we could easily adjust accordingly if needed), we get an aproximate valuation of ~$1.5B or $5.50.
Appyling a small discount here to Pipe's value is also appropriate, because Pipe is more of a gassy/condy producer & much less oily than the assets Spartan sold. So that further reduces the value to about ~$1,3B or ~$5 per share and i see this a the "top" or high end value for any M&A invovled at current energy pricing. Of course "things" could possibly change on that end & i will adjust accordingly if needed if they do. As Spartan is now out of the equation as far as any M&A for Pipestone is concerned, this reduces the list of potential dance partners to about half a dozen. As stated previously when i intially made the investment in Pipestone, that's really the ONLY reason i'm here and the atrractive valuations of course. I really have NO intentions for this to be a LONG term investment, and it was never the intent to begin with, in my case.
So therefore taking all the above into consideration, i'm revsing downward my "expectations" of what Pipe could possibly fetch in any M&A right now in this environment. Where i once said that about $6 would be a reasonable range with $7 as being the ultimate cap, i'm now revising this downward to ~ $5 with an absolute bottom of $4 and a cap of $5.50. My average here is about $3, so if anyone has a cost basis which is above that high end cap of $5.50, you might want to rethink your strategy or reconsider your objectives & reasons for being here. While i still beleive Pipestone will get bought out or merge in the next 12 months, things have might have been delayed and become more complicated due to energy pricing in the toilet.
GLTA