ValuationAnyone care to venture a guess as to where the stock price will trade in the coming months?
For shareholders that elect NOT to participate in PNG co, at a minimum they would receive:
• $0.75/share as a Return of Capital, plus
• Cash proceeds raised on sale/spin off of PNG co
Considering PNG co is currently doing about $54M/year in revenue and $15M per year in Operating Income - with ONLY ONE RIG drilling, what would a valuation attempt of this business look like with the potential of 4 rigs drilling? You'd also have to consider any income generated from equipment/tool rentals, camps, manpower services etc.
Even if we say only 3 rigs drilling the future - that's operating income of $45M per year. Put a 4x (conservative multiple) on that and you get $180M. Divide that by fully diluted shares outstanding of 51M shares and you get $3.52/share.
Now let's say you only get 75% of shareholders exercising right to purchase at that price. Cash proceeds raised by remainco would be $2.64
• $0.75 RoC, plus
• $2.64 Cash proceeds on sale of PNG co
= $3.39/share (this ignores any value ascribed to RemainCo operations).
*** I simply don't see how the share price can continue to trade at 40% of the value