Post by
mrmomo on Jan 03, 2024 9:51am
Should you STAY or should you GO?
Be aware......this is a VERY LONG post. So only for those with the intellectual capacity & patience to handle it and definitely no serious ADD issues........GL!
If you're as old/ancient like me, then you should VERY familiar with that little tune! And i think it's VERY appropriate to use that little song, and it's message, here, as a metaphor of what to do in this delicate situation. So as promissed to you dear folks, this will be a continuation of my last commentary posted on here (please see link below if you havent seen or read that yet & i strongly suggest you do before proceeding ahead here!), regarding the events unfolding in Athatbasca Salsa Sauce.
https://stockhouse.com/companies/bullboard?symbol=t.ath&postid=35797416
So the question to be asked here, should you continue to stay or should you leave ATH in the past for greener pastures AFTER what just happened? Is it really worth it for you to stick around..... to put it bluntly? Well......in order to answer THAT, and address it correctly for each individual, you would probably have to know EXACTLY what are your objectives here AND where you stand on the food chain. As i', not the holy Oracle, i can't predict or guess what that former could be for each one of you, therefore i can't help on that front. But i can help with the latter! When i say you have know where you are on the food chain scale, in this instance i mean where you actually bought in & what your cost basis or DCA is. WHy is that important? It's important for the following reasons, and i 'll explain below.
But first, i must explain to you what my premise is, what has actually happened here with ATH and where i think it's going. If you've read my previous post titled, "Cenovus buys Athabasca for $3B?" then you alrready know part of the story & my feelings here. So it's crucial you read THAT post first before this one. As i've clearly explained in that post, i do not think many here or the vast majority of you, KNOW what really went down here. There MAY be some that do, but that's a very small minority consisting of maybe two or three people. So if you don't know what happened, let me TRY to explain ......briefly.
As you all know by now, you KNOW my feelings/opinions towards the company and it's "generous" valuations. I think i've made that quite clear for that past two years. I had consistantly stated that at $75 WTI oil, Athabasca was FULLY valued at $2.50-$3 and that trading at $3+ it was grossly overpriced. And the best you could hope for, for further gains was a "generous" buyout around ~$4. And that's EXACTLY what happened here with this Cenovus "joint venture". Yeah.. not the buyout you guys were expecting or i for that matter (even though i constantly precdicted/stated it would eventually happen!) or even hoping for. But this is what you got and odds are that NOTHING better will come your way. A few comments on that .....right at the end of this post .....for you guys!
For those of you that are disappointed with the outcome.....Just look on the bright side. It's really not THAT bad for a company that was almost BK in 2020.....right? I mean they were literally months.... mere weeks away from outright bankruptcy, along with a few others, and were saved from a TKO right at the last moments by the Gov't bell & Corona! So be happy you're getting $4 buckaroos and not a BIG fat doghnut. Which could have easily happened IF the Kanuck Gov't didnt loan them money and/or the aftermath of Corona. For those of you STILL not satisfied with the accomodation/arrangment and "believe" it still has lots of room to grow, well my friends......i'll let you in on a little secret.........
You DONT KNOW SQUAT! That's the first thing! The second thing, these foolish people that believe this fallacy, which are the regulars that have continuously been pumping the stock for the last two years or the delusional folks that have fallen in luv with it and think its better than sliced bread. These lost folks can be seperated in two groups. Those that think this isnt a buyout (there will be NO buyout!), isnt the end and the stock will continue to $6....$7...$8....i think you get where i'm going with this......and those that think this could be a buyout or one, a more convincing solid one will eventually come....and think there will be a "generous" premium paid to them. Those in the first group are TOTALLY lost, so i won't waste precious time addressing them or their false, delusional beliefs. But for that second group of folks, i'll say the following.
At least you guys are smart enough to recognize that there's a buyout in the picture there somewhere. I'll give you at least some credit on that! As for getting a BIGGER premium paid to s/h for the "eventual" buyout.......you GOT IT already! Before i say anything more, i'm sure many of you are VERY confused by those statements and really don't understand or cannot grasp it. So here again, let me explain it to you .....WHY you won't get that premium you're hoping for. When i say you guys "already got it" i really do mean it. So you must be asking yourself where is it? And i'll answer by saying.... its in the pockets of ATH mgmt.....that's where! The so called "premium" for the buyout that happened (yes it really did happen!) was paid to the company in the form of the "joint venture" with Cenovus and Cenovus' "generous" contributions to that so called Frankensteinish arrangement.
You get it now? I hope so! Like i expalined in the previous post, this so called arrangemnt made between Cenovus & ATH, was mostly for the benefit of ATH mgmt & BOD. THAT's your premium for the buyout! Not what you were expecting right? I know......neither was i, but then again since i'm not a s/h i'm really not that upset and really don't care either way. But IF i was a s/h....i would probably be VERY agitated to put it mildly. And to be really honest, i'm really not THAT surprised that ATH went in this direction, taking care of themselves, because the signs through their actions, have been there for a VERY long time....to indicate this "unfortunate" trajectory.
So where does the poor Athabasca Salsa Sauce s/h go from here? Should you stay or should you go? IMHO, and i'll be brutally honest with you folks, IF i was in your shoes and i had a cost basis of $3.50 or lower, then it may make sense to see this through till the end. To see what possible other surprises could be in store ahead. Maybe some shares in the spinoff "Duvernay Energy" and maybe a very small boost in the stock price IF oil prices hold around $75 or higher. I mean you waited this long for that medoicre roi, what's another 6, 12 months? On the other hand, if my DCA is more that $3.50, i most probably would NOT stick around for the clown show, because it's probably not worth it and your your risk isn't as low as some who have a lower cost. Is it really worth it for you to get that extra 0.50 or $1 when there are better, less risky opportunities elsewhere? Think deeply & logically about it.....i think you'll see i'm right on this!
For those asking themselves IF can anything change this unfortunate fate? I'll say yes, there's one thing that can BUT the odds of it happening are extremely low. In order to TRUMP Cenovus offer & arrangement with Ath, a third party would have to come in with a hostile offer of more than $5 cdn. Is it possible? Sure ANYTHING is possible..... but i would rate THAT possibility at about 20%. Why so low? Because first, hostile offers in Canada don't really happen anymore in the Canadian oil patch, and haven't for some time. These Canadian O&G entities & their Ceo's have a kind of understanding that if some M&A is involved between two parties, a third does NOT come in and interfere with the negotiated arrangement between the 2. In other words, you don't go mow someone elses grass!
Secondly, the number of possbile suitors who have both the financial capacity & synergies to buyout the assets of someone like ATH is VERY small. Only a handful which can be literally counted on one hand. That would be Suncor, Canadian UnNatural, StrathCona & MEG. You can probably forget about Suncor, after Suncor securing the Forest Hills assets from Total. Could Suncor still be hungry & interested in picking up Ath? Sure, but probably not for a crazy price of $80k boe! I would also rule out both CNQ & Strath for the same reason, just too pricey and its NOT their style to overpay for mediocre assets. Especially assets like these that come with a BIG stigma these days. So what are you left with? LOL.......The one i actually thought would make a play for Athabasca Salsa Sauce.......MEG!!!
Is it possible? Who knows? But a price tag of $100K per boe would probably be needed for it to succeed and i really don't think that even the folks at MEG are that desperate or crazy! No my friends, once you consider what actually just happened, it all makes sense and this is probably the best you'll get if you're a ATH s/h. The only questions left is WHEN! And that's a VERY important question to be answered also because 2024 is a crucial year not only for the US Presidential elections, and see WHO gets into the Whitehouse as Potus, but also to see WHO sets policy for energy, which will greatly affect the Canadian O&G sector as a whole. And isee some major repercussions coming in the next 12 months....
That's it for now...... i know this a was long post, but i hope it has made things more clear and it has helped some of you with your own financial decisions.....
GLTA