Buyout by year end?This is a LONG read so not advised for anyone with a low IQ or short attention span or ADHD......
Seems very likely to me, especially after having made their latest move, divesting practically 90% of their conventional oil output. So the question here really isn't one of IF they will be sold BUT of WHEN and at WHAT PRICE. So to answer those two critical questions, for those "inquisitive minds" that are interested in knowing, or at least having an idea of what's going on, let's TRY to address them. As a disclaimer here, please note.......as i've stated in the past, that i'm NOT a holder of the stock AND therefore have NO bias either way.
Before i start, you guys know my "feelings" regarding this company. And i've made that known for well over a year. At the current prices it trading at and where WTI/WCS currently are, this is imho completely overbought, overpriced & totaly bloated s to it's valuations. At $75K+ per flowing barrel, it's one of the more pricer names around along with MEG. So it's NOT cheap by any metric we use or whatever anyone says. BUT that doesn't mean there's no one out there who would be willing to pony up some serious money to take them out......even at these lofty levels. As i've said, i've seen stranger & crazier things over my nearly 40 years in the markets.......
So to try to understand what's going on here, let's see if we can get some answers. First, let's address the easier of the two questions. WHO could possibly be interested in the Athabasca Salsa Sauce.....at these levels? Well, since the Europeans have basically cursed this "niche" sector because of the ESG boogyman and have consequently all left for GREENER (lol no pun intended!) pastures and Trudope has basically peeved off & chased out any remaining Chinese interests, you're more or less left with a few American outfits & the Canadian entities. The former have also been infected with the ESG corona virus and have lost totally "interest" in our Bitumen Buddy & have been slowly divesting themselves of ANYTHING "OIl Sands" related.
So as you can see, what you are basically left with are ONLY the Canadian operators themselves and NO ONE else. Which is quite unfortunate if one thinks about it, as this sector was THE place to be, booming big time across the board for nearly two decades before the ESG Bigfoot came in and destroyed it overnight. Quite sad imho, as the future was so bright for Canada & especially for the province of Alberta & Albertans.
So, if all you have left are Canadian O&G entities, WHO are the ones who would be most likely interested? Well, anyone that has a "significant" interest in the Oil sands and has the financial means & muscle to acquire additional properties. And that would be Canadian UnNatural, Cenovus, Suncor, Imperial, MEG AND the newcommer coming online soon but now private soon to be publicly traded Strathcona. And that's about it. Right off the bat, i'll eliminate Imperial, because they're a division and the Canaidan arm of XOM, and they've shown to be "wanting" to exit this space. So out of CNQ, CVE, SU, MEG and Strath.....who would be most likely?
I'll do another round of elimination and remove CNQ. Why? Because they AREN'T in the habit of buying "expensive" assets and 99& of the time always look for/acquire value plays or eXXtreme bargains. And at current NAV on a per flowing barrel metric, ATH isn't anyhwere close being a baragain nor cheap. So that leaves us with CVE, SU & MEG......and maybe Strath. But to make things more clear, i'll go ahead & elmininate Strathcona.......for now! Why? Because Strath will only be publicly traded somewhere near Xmas and since they already made a purchase in Pipestone, it's doubtful they'll jump into another acquisition right away. Doubtfull BUT not impossible, just to be clear. At least not until Q2 imho.........
So now we're down to CVE, SU & MEG as the last ones standing. Out of those three who has the most incentives, synergies & motivation to make a play for Athabasca Salsa? As SU is embroiled in many issues they need to reolves, AND have sown over the years that they won't/aren't willing to OVERPAY for assets, then that more or less eliminates them. Besides, Suncor doesn't really have the synergies like the other two AND i think if they have to or forced to pay a HEFTY premiunm for producing assets, they rather pay for the remainder of Fort Hills from Total rather than acquire ATH. But that's JUST mho based on XP and past history & mondset of all the players involved.
So after ALL those elimination rounds, you're down to only TWO......Cenovus & Meg. And honestly, it will be VERY difficult to say with ANY accuracy or certainty which of the two will be the one. Because both have the financial capacity, the critical synergies and above all the motivation to do so. So i will leave it up to you guys ot decide which one is more likely. For me, both have an equal probability or odds of happening. So now that we know who it possibly be, all thats left is at what price the acquisition will be done.
Who would be MORE willing to pay the $4.....which is the bare minimum which will be required by either suitor to entice Ath mgmt/bod and their shareholders to bite & sell? Cenovus or Meg? At $4, that would entail a buyout of aproximately ~$2,5B with debt, or en eye popping $80K per flowing barrel. A VERY expensive acquisition, by any metric, but i cannot say they, meaning both CVE & MEG wouldn't totally rule it out. Like i've said, i've seen crazier thing happen. Btw, anyone that thinks or beleives that ATH will.....should get more than $4, think about this. The most recent deals or acquisitions of PRODUCING assets that were done in the Oil sands, most went through at about ~$50K.....same goes for conventional oil. So i seriously doubt that either Cenovus or Meg will overpay by miles over that figure.
So what's you're basically looking at is anyhere from $3.50 to maaaybbbeee... a little over $4. If CVE or Meg are motivated & crazy enough to offer the latter to Athabasca Salsa Sauce s/h. If i was either a CVE or MEG s/h.......i probably wouldb't be smiling right now.......if that were to happen. So somone besides ATH is going to be both happy & relieved........ Just in case some of you think i'm crazy or not totally convinced, i'll just let you know that i've practically called every buyout (and Bk!) in the Canadian O&G sector, with accuracy btw, long before they actually happened. So diddo for Painted Pony, for Storm, for Spartan and many others.....,,,Just so you afre aware 8)
GLTA