You gotta RESPECT .....andGive Cresscent Point mgmt /bod their due credit for what they're doing here. Or at least, WHAT they're ATTEMPTING to do. You just gotta give them that respect, because no one else. aside from maybe one or two others are doing what NEEDS to be done in this VERY dreary & bleeak Canadian o&G sector. And after thinking about it, about this deal, THIS is the premise i';ll be working from & basing my comments on.
First, let me say after reading the details of this deal between Crescent & Hammerhead, I TOTALLY understand the frustrations of s/h & do sympathize with them. Why? Because Crescent Point did the unthinkable, the impossible, the things you don't do or cross to peeve people off. Specifically your investor base & shareholders. AFTER announcing & DOING two major deals, acquisitions is LESS than 12 months, this is what they did. And most investors, especially if you're a holder of CPG stock, weren't too happy with it & them.
So getting this out of the way, i understand why folks aren't too happy with this deal with HammerHead, heck, many probably weren't too happy with the Spartan deal just a few months ago either because it created dilution & put a break on GPG stock.......as this deal With HH is doing now as well. And ontop of all this, they announced a MAJOR financing to finance this deal which probably [eeved off more investor & s/h.
So yeah my dear CPG friends, i totally get it! But you know what? Be thankfull you're a CPG s/h, because they, meaning mgmt, know what has to be done to succeed, and they're actually doing it, as opposed to most of their peers just following the status Quo & stagnating. So just based solely on these two deals this year, you KNOW mgmt is doing the right things, the company is being well managed for be prepared the future. Why? Well let me give a very brief history lesson & on the troubles ahead & currently for the Canadian Oil patch.
As i mentioned MANY times in the past, on many Canadian O&G forums on SH over the years, the Canadian O&G sector is a totally mess. And has been so for almost two decades, but got rreally bad after Trudope & his merry band of Sea Pirates & Circus clowns got eleced into office with their ESG GREEN crazy agendas. They took a very fragile, fragmented & fractured industry, turned on it's head and then shot a bullet straight in between its two eyes. That's what the Canadian Gov't did the whole sector and everyone operating in it. Ontop of this utter mess, ALL the foreigners, like Chinese, Europeans & especially the Americans, who were responsible for most if not ALL of the huge moneu inflows into the secotr & the M&A, we're all driven away by the Trumole Gov't and ESG policies.
So...... not only did the Canadian O&G sector get worse, they never truly evolved or become more efficient like their American counterparts. And this is where there are major differences & discrepanciies in terms of valuations between the two lye. While the American O&G operators evolved, changed and became more efficient producers by doinf such things as reducing costs & consolidating the industry, the Canadians....well.....under Gov't like Trudope they just became more fragmented & more costly and they STUCK to the same status Quo they've been using for decades. So in essence what you have here, is these goofy Canaidan Ceo's operating with 90's or earlt 2000 mindsets, never evolving never pusginh ahead to become better operators, more efficient operators. And when everyone in the sector is doing the SAME EXACT thing, you get the mess that's the current Canadian O&G sector.
So this is WHY you have to respect, even if you don't agree or like it as s/h, what CPG is attempting to do here. Making the hard decisions, the RIGHT decisions that those OTHER goofy Canadian CEo's will not do or even consider. This is WHAT the Candian O&G sector truly needs, more actions or deals like what CPG is doing. Meaning MORE consolidation by removing the weak, smaller less efficient operators or the unwanted extra baggage or DEAD weight as i like to call them. By my esitmations, the Canadian O&G sector are probably at least a decade behind their American conuterparts. And if they do not do what they American have done, the Canadian O&G sector will left in the bowls of the forgotten pages of history. And no one, including markets & investors will care about them.
The Americans started doing all this, all this "much needed" consildation over 10 years ago.....and look at the now. Nothing left except SUPER majors like Exxon, Conoco & Chevron and Cenovus/TOU type sized operators. And the former are now gobbling up the latter. The Canadian are not there yet, not even close, but IF others take a page from CPG's playbook and follow the same path, maybe, just maybe there might be some hope left for the Canadian oil patch. That & hopefully booting Trudope & his Circus Clowns out of office in 2025. So like i keep repeating DO NOT hate what CPG is doing, respect it and admire it because its what this sector needs and desperately needs MORE of. Hopefully this wonderful M&A action will continue into 2024 and well beyond until only about half of current operators remain. Which my estimations again, should be reduced from the current 40ish to about less than 20 or so.
Now the deal itself. Sorry for the long commentary, but imho it was required so you guys fully understand the situation & wth is going on here. So you odn't hate on CPG more than you already do. At 2,5B for HammerHead, which imo was more like $2,6B because they failed to include other debts HH had. So i'll be working on that number NOT 2,5B. So $2,6B for 46 boepd translates into about ~56K per folowing barrel. A VERY rich deal indeed and much better deal than what Spartan was offered just a short time ago. So what does CPG get for 2,6B? They get 46k boepd which consists of ~35% light crude or 50% liquids when you include the NGl's. So this fits in perfectly with CPG objectives as does HH assets, like a glove with their other acquisition of Spartan. So even if this was a VERY expesnive deal to make & acquire for CPG, i think it was the best one available or to make compared to what out there. The synergies alone, along with some strategic cost cutting measures should be sufficient to justfy the deal, even at these levels.
Sure this along with the recent financing will be a HARD sell for Cpg mgmt to make to it's holders, BUT in the long run, in the longer term, as long as WTI oil stays above $75 on average for at least 5 years, it should pay itself off quite nicely and be arrective for CPG......and it's s/h. So the final word here my friends is this, THIS deal was not only needed, required to be made by CPG, so they can compete on the same level of the majors and be/stay relevant for the markets, this was also REQUIED & NEEDED for the Canadian O&G sector as a whole. And hopefully othersw will follow suit, in the same footsteps as CPG has courageously done!
That's MY 2 cents worth on this situation.........take it or leave it!
GLTA