Arcan Resources Ltd ARNBF

potential investor; insight requested

[jacek99]

Hi,
I'm interested in taking a position, however, their debt load scares me. Is it @ $300+ million? What are they going to do about this? I noticed in the most recent quarterly that the debt was paid down a bit and since oil prices have moved up, is it safe to say that CF has gone up as well?
Is this a sound buy at this price?
What does everybody see as the next steps for this company?
What price do you see this hitting in the next few months?

Thank you for any and all your input.

[nlr2]

If the debt load wasn't so horrific it wouldn't be 50 cents. Haha. The three ways out that I can see are, 1) Sell Deer Mountian. If they got around 120 million they could reduce the credit line to 35 million which the two debentures outstanding for about 180 million. Production would decline by 1100 BOE/D and the line of credit would be cut. The positives are that they would have a bit

[jacek99]

Do you see one of these most likely to happen; any guesses as to when and the impact on price? I see a lot of potential and likely the 1st or 2nd happening considering where the price of oil is and likely not to come down in the next while. If somebody was to outright buy ARN outright, how much would be a fair price per share that would likely get the deal done?

[nlr2]

If someone wanted to buy Arcan outright I would say a dollar is fair. But the longer they wait the higher it goes, potentially. The thing to remember is that Arcan on a reserve basis is a steal of a deal, even with the debt. They just don't have the cashflow to internally realize the NAV projections. So if they ever find a way to get the required funds, either as an independent company or part

[mombasa1]

Here are a couple more points to add to your analysis nlr2.  Arcan's debt is unsustainable long term. They will have to address it sooner than later, so IMO the sale of DM2 is not an option.  THAT will be the key to unlocking Arcan's share price IMHO.  The stock will move over $1 on news of the DM2 sale alone, and it definitely appears to be headed that way now. I also

[nlr2]

Good points Mombasa, I agree. Thanks for adding on. If the first series of debentures was paid off they would save around $5 per BOE/D which would go right to the bottom line. So they would lose 32.32(corporate netback) x 1100 boe/d (DMU 2)= 12,976,480 in cashflow for the year. However they would add 5 (interest savings) x 2500 boe/d (rough production figure)= 4,562,500 in savings over the year