RE:Transformational deals equals lousy performanceGrowth can be achieve organically or strategically and a few critical factors come into play if the latter. The deal with VRN was for synergistic, contiguous good producing land, low decline rates with total SOIL production expected to be 38,000-40,000 boe/d. The $650 mill Note assossicated with the purchase will bear an annual interest rate of 9.625% starting on June 14, payable semi-annually starting on Dec 15 and not due until June 2029 which is 5 years out.
The int rate of 9.625% is higher than I would have liked to see but then again Saturn is a small/med oil company so I just assume that is a resonable rate. The interest on the Note will be about $31.2 million semi-anually while the cash flow will be directed to increasing well production and reducing debt. Remember they pay no dividends so that is a bonus in terms of cash flow allocation and all things equal, imply a high price rather than the constraints of companies committed to divs. I see the stock is up 5.6% today alone and is the top performer of all the O&G stocks I own.
This company when they pay down debt substanially will be a major takeout company or will contine to appreciate based on their size and financial situation. glta