StrathCona.....Hold, buy or sell?This post is strictly for O&G investors who aren't TOO happy with the Strath-Pipe deal they just got, unsure what to do with their investment, on the fence of whether to sell or not and maybe looking for a new home for their money. So if you're interested, read the following, as this is MY assessment and my 2 cents worth.......
As you all know by now, i wasn't TOO happy with this deal, even though i actually wasn't a long time holder or fan of Pipestone. I only bought in, the second time around, because i JBEW it was only a matter of time before some predatory jackle would pounce on the company and buy them out. And i had been saying this for some time, even before it actually became a reality. Now that it is a reality, and the deal is total "you know what"it, we have to deal with it no matter if you like it or not.
I have to say this is one of the VERY dew TO in my VETY long years in the stock market where i didn't come ontop with a even a modest windfall. And trust me when i say, i've been part of MANY of them where i've made some VERY good returns. Unfortunately for me and the rest of the Pipe investors, when bad apples/actors, corruption and backroom boiler room wheeling & dealing take place behind the scenes for the benefit of a FEW, there's absolutely NOTHING we can do except watch the train wreck as it unfolds. And this was indeed a massive train wreck for Pipe s/h, espcially those who've been holding for such a long time maybe "waiting" for a day like this. Where this was suppose to be an occassion for relief, celebrations & popping champagne bottles, unfortunately ended up like a scene straight out of Titanic.........
So now we have a choice ro make, actually we HAD (and still do!!!) a choice ever since this awful deal was announced. To leave or to stay? And if the latter, should we buy more? Now like i said, this is only for investors who want to keep it in the faimily, and stay invested in the Canadian or US O&G sector. If you wish to delve into other sectors, that's your perogative and wish you well in your endeavors. MY goal here is to see IF it is worth it to stick around, even though i despise SCR & it's mgmt for the tactics they used. Because sometimes no matter how we feel about a certain situation, we must hold our noses, not to smell the stench in order to benefit/profit from it. Having strong emotions, being emotional and being TOO reactive without thinking properly isn't the best thing to do in or strategy the stock market. Because it usually leads down the wrong path & eventual failure.
So having said all that, sshould you hold on to SCR or dump it? Well, we all know the "figures" they used to evaluate Pipestone & the deal were pretty vague, bogus & laughable at the time. But since then, Wti oil has moved up substantially from $70 to just under $100. Or a jump of 30%. Which changes the financial equations for many of these producers. So if we take Strath's closest peers, which in my mind are WhiteCap & CrescentPoint, as they're around the same size in terms of production and their production profile is relatively comparable as well. Somemight say that Cenevus or Canadian UnNatural would be BETTER choices for a comparative model, but i say SCR isn't at the level of those two .....YET.....and those 2 are massive producers, several X the size of SCR. So in my mind, i just don't think it's appropriate to use them as peers or for comparison puproses to extract value for SCR.
Therefore, IF we use WhiteCap & CrescentPoint as a point of reference & what the market is valuing those companies at, we see that around $60K boepd +/- 5k is the KEY figure that is used & ALWAYS show up. No matter the competency or quality of mgmt. So this is the BASE value we should really be looking at. So, if we take that $60k boepd and apply to SCR, we get a VERY different number/value that what SCR is currently trading at. Which implies that StrathCona is UNDERVALUED by ~50% when compared to its closet peers. If you think or believe this is unrealistic, these measures arent appropriate or those metrics are too high, then your eyes will pop out when you see what both MEG & Athatbasca, two strictly Oil Sands plays, are being valued at by the market. So if you think $60k is high, then what about the $85K being given in Meg's & ATH's case?
So in the end my friends, THESE are the numbers & FACTS, no matter HOW you spin things. And eventually these "overlooked" discrepancies or anomolies will disappear with time one way or another. And that means either SCR stock will gradaully move up closer to those levels stated above OR those companies trading way up there will eventually come back down closer to SCR's valuations. Which one do YOU believe will occur? IF i was a betting man, AND you take into consideration ALL the blantant, "questionable" manipulation the StrathCona-Waterous folks did on Pipsetone's stock & STILL doing on SCRs', then you would have to conclude that SCR will "eventually" move up "closer" to its peers........for the benefit of ALL involved......AND.......IF the markets & energy prices stay stay stable and don't crash.......
MY 2 cents worth.......take it for what it's worth.........or don't.......
GLTA