The Deed Is Done!....Time to Move On!Well my dear dear friends, out time together has finally come to an end here. So unless there's some divine intervention or miraculous development that changes things for the Piper, this WILL BE my last post here. But before i go, as promised, i will give my "personal" rec'd for like minded folks like me who want to move beyond this, to more some viable options to reinvest their Piping Hot holdings. In addition, i will also make some brief comments on the deal with Strath, to clarify some confusion & misinformation around it. Enjoy!
After reading an entire day full, ALL TIME record breaking amount of comments posted yesterday, today i will take a bit time to give you MY POV, in the hopes it will alleviate some of your concerns. Reading all these "colorfull" commentaries, btw some of which were VERY entertaining, it seems evident that many folks here, probably the majority are NOT REALLY all that happy with these deal. Some being downright angry & very frustrated with it. And I FULLY understand that position & those emotions, because guess what? Been there, done that....many times over. This pony has been to the circus many times over.....8)
So trust me when i say, i TOTALLY understand. But i say to those people, most probably casual inexperienced investors, or complete newbies or maybe just simply emotionallly combative folks always angry when things don't go their way and who never learn their lessons.....maybe all od the above. Who knows? But no matter which group you're in, anyone not fully versed in the realm & complexities of these markets, something unexpected, unfortunate or to to your liking will always happen. So i offer the following advice, and take this "wise" counsel from a VERY EXPERIENCED investor like me to heart... LET IT GO! And move on.
Now with that said, i few notes on the actual deal. It seems the crux of the anger of most s/h here, is around the actual valuations of where the deal was done at. And i somewhat agree & sympathize with you folks. But to remove some of that anger & angst, just let me clarify a few things.....for you. As this deal is somewhat vague on details and a little complex, being somekind of merger/RTO/IPO all in one, let us focus on WHAT is known and let me throw out a few numbers for you. If we look at the Proforma numbers they gave us, it states that the "MERGED" company will have a MC of ~8,6B, debt of ~2,9B and o/s of 215M. With these figues, we can deduce a few things. As this implies that Piping Hot s/h will have a 9% interest in the combined company, what can we derive from that?
Well for starters & most obvious, it means or implies that Pipestone s/h will have a 9% in a ~8,6B MC or 860M valuation. Which if we take tha amount of o/s that the Piper currently has, which is 280m (lol not sure where folks are getting some of their numbers but 280 is the corect figure!) we get ~$3 per share. In addition, going by those numbers, after the deal is consumated, the new merged company will probably be trading around $40. I know these latter numbers are a little more subjective and just aproximations, BUT according to these, 9% of 40 is $3.60. So just something to think about. There's still a lot of missing details will be hoprfully reveled by either mgmt in the coming days.
Well, that's ONE way of getting some grasp of where this deal done. By using their own figures they provided. But for those not totally convinced and NEED a lot more, then i offer you MY assessment or version. If we take a different route, and maybe take some comparative examples of valuations, it may give us a different picture. Taking a peer company, who's operating in the same area and more or less a production profile that fits. For this i'll take Kelt. I know this isn't the "perfect" exmaple, but it would set some critical paramters. Kelt being a 40% liquids (25% crude 15% ngls) 60% gassy producer in contrast to Piper which is 40% condy/ngls & 60% gassy. At current prices, Kelt is being valued at ~$1,2B...... with both Kelt & Pipe operating at about 35K boepd. Some quick math gives us a ~35K per flowing for Kelt AND ~32K for Pipe. Of course you have to take into account that Pipe has NO crude output to speak of so you MUST apply a discount to those figures.
But what really sticks out here in those numbers, is that EVEN with a discount applied to Pipestone for having NO oil production, when the assets of Pipestone were monetized through the acquisition, very little premium was applied to them. How do i know this? Because when you look at some of Piper's more "gaseous" weighted peers, like Bircliff, Crew or Peyto, all of them are "currently" trading around $30k per flowing barrel.......WITHOUT the assets even being monetized YET! Which is very telling of what's going on here. At the bare minimum and to be somewhat "fair" to s/h by mgmt staying true to their fiduciary duty to them, this should have been done around $40K boepd or for $1,4B or ~$4 per share. I mean EVEN a cheap skate, dubious character like Canadian UnNatural paid 30K per flowing a few years ago to buyout a 90% dry gasser when the energy market was in shambles!
So that's basically the picture my friends. A resounding YES, this "suspect" deal was done in a unceremoniously way that does NOT benefit the small retail holder and backloaded for those that have a larger stake and/or in control. I'm not quite sure WHY GMT & Riverstone elected to go this route and basically shaft everyone except themselves, but are we really that surprised? You bascially have a woke, NY based venture fund and the unpredictable GMT at the helm, what did you expect? Really? It's for these "exact" reasons i stated that a CHEAPO sale to CNQ was becoming reality.....and still surprised it wasn't actually CNQ that got this prize. But it is what it is my dear friends, and there's not much that can be done now. With the terms of this deal, and this being a "mutually agreed" upon deal by both management teams/bods, there will probably not be ANY competing offers and this will be consumated & excuted as is. With the lack of any dissident, impactful large s/h, i seriously doubt that either GMT or Riverstone will contest, as i'm sure Strath made sure they were completely onboard (with the help of enticing incentives i'm sure 8) BEFORE making this public and dotting the final i's.
So where does one go from here......if you wish to get off the Piper wagon or move on? As stated before, personally, i WILL sell before this deal is finalized and not be taking ANY Strath paper. But definitely NOT under $3.....which is a travesity imho. I'm not happy with this deal, but i'm not that upset either, because i KNEW the risk going in from the start, so i was fully ready for a scenario like this. And stated several times on here IT COULD happen. First, to address folks who want to hang on a bit longer to squeeze out a bit more, i think this is a fairly risk free & safe option to take. Collect another divvy or two and then dump right before it's done. My guess, after the volatility & arbitrage dies down, this should start to move to a more "JUST" level than what it is currently at. With a bit of luck & time, before this is finalized in Q4, it should be closer to $3.5.....maybe $4 if the general market conditions will allow.
On the other hand, for investors like me who want out.....now or in the immediate future, what options are out there? First, you must know WHAT you objectives are. Is this for capital appreciation or passive income.....maybe a little of both? For now, i'll just give my advice for those who want one or the other. For the divvy crazy, passive income guys, i would suggest either Cardinal (CJ) or Peyot (PEY). Both are fairly safe investments, at current energy prices, in the right range price wise and their divvys are intact/stable at least until year end. There are NO better than those two for passive income in the Canadian energy space.
For those who don't care about dividends, just looking for a significant upward move in a potential ep, then i would say .....two things must happen for that to occurr. Either a blackswan event or the US Gov't & EU let prices go free without manipulation in the paper markets. As the latter is VERY doubtful anytime soon, you must place all bets on the former, which for all intent & purpsoes could be double edged sword, and more than what you're ready to accept. So you're best bet in the end for the Canadian O&G space, is either a passive income position OR looking for the next Pipestone.....through more M&A.
So that's it my friends, this is my "wise" advice for you and my final comments on here. For those with more questions regarding this deal, reinvestments or soemthing else relayed, i'll be willing to answer them until weeks end. After that MrMoMo will be performing his masterful Houdini impression, and leaving this building for good! Good luck and i hope this commentary helps you.....in some way.
GLTA