Cardinal Energy Ltd (Alberta) T.CJ

Should CJ Be Interested In GXE?

[Quintessential1]

I see GXE put themselves up for sale and according to EN they are looking to unlock value at higher commodity prices.  Okay but do they desrve it?  Like Laurention Bank, just because you want a premium doesn't mean you should get it.  I think putting yourself up for sale demonstartes weakness.

They have some operations that overlap with CJ's on a geographic basis so maybe there are synergies and efficiencies to be had and at a decent discount to what GXE could be trading at if WTI pricing stays at $90 and GXE digs themselves out of their debt whole themselves as I expect they will eventually.  Honestly they just sort of jumped the gun on their divy cut as it is more than affordable now with some debt reduction room left over.  

So how would investors here feel about a 1:7 share exchange offer for GXE?  At current share prices it only represents a 20% premium to GXE shareholders but would almost double the existing  dividend yield they are getting making it almost like the cut never happened.  In return CJ gets more reserves overlapping with their operations and a pick and choose labour pool with some potential upside for CJ shareholders based on 52 week highs.  Is it even worth considering for what amounts to 5-10% overall upside?

I don't do flowing barrel calcs and comparisons so if somebody else would like to and  add it to the post for consideration it would be appreciated by me and maybe others here. 

Also I know there are a few GXE shareholders that either monitor or hold CJ shares here so feel free to weigh in with an opinion or even a GFY Q.  LOL I can take it.

GLTA

[JayBanks]

Could we not pick up all of GXE and maybe split it with someone else just taking on the areas that work well with us? Lower the acquisition costs, premium or no premium... and I'd rather take it on debt than shares... I have no real interest in being debt free unless there is no sensible acquisition opportunities. I like leverage that makes sence, let the experts of the company use thier

[Quintessential1]

Okay the market cap is $235M but you won't get it at face value so $275M to buy them up if they agree to a 20% premium and then at your $40M FCF forecast 2 years to pay that off.  No new shares issued and a .01 cent div increase to CJ share holders bringing it up to $.07 per month or $.84 per year making the yield  just over 11% per year.  Oddly enough GXE has over 1.5 times

[JayBanks]

Haha, the "quintupling of the debt" is just relative... if we had less debt that X number is bigger and if they carried more debt your saying it would be less noticeable... Other than that yes you laid it out quite well... to eat the whole company it extends the length of time expected to get back to where we are now debt wise... but we get bigger, hopefully get synergies, get more FCF

[Quintessential1]

LOL .  You're right the quintupling of the debt is relative but does put it into perspective especially for a company that has been beating the zero debt drum for over a year now.  I also agree that zero debt is not necessarily in the company's best interest and I am pretty sure that they stated acquisitions to increase production and reserves over ruled that plan. Yeah a split

[tylerreddick]

GXE is second rate scattered assets, and they have a ton of decommissioning liabilities. But if CJ could pick them up for under a buck, it may not be the worst deal. But they should definitely avoid paying more than that.

[Quintessential1]

Ok I do not believe that GXE management or shareholders would approve a bid under $1 but maybe you are right and they would and maybe it is not worth bidding on over that amount. So your offer would lower that share ratio to about 1 for 8 shares which would only add 30 - 40 million shares to the float or 230 million to the debt for a cash offer or 4.6 times the current debt. I don't see a

[tylerreddick]

Doesn't matter if GXE would accpet a $1 offer, just that no one should pay more than that. Their assets simply aren't that valuable.

[Quintessential1]

I don't know Td.  According to Jay CJ could get payback within 2 years and increase the div by 1 cent per month all on lands that overlap CJs and have 10 years of production.   That might be worth the 20% premium GLTY and all 

[Pottsy]

All acquisitions have issues, hidden ghosts, Cj is doing well. Current major investors may not like the risks causing changes in a stable management. It's too small to risk buying a company that is imploding.  Just my take.   P

[Quintessential1]

I hear ya Pottsy and I am sure that the major investor would be consulted before an offer is made and of course all shareholders would get a vote before an acquisition went forward. As for GXE imploding it would be prudent to examine if they actually are so as not to pass up a deal. With GXE cutting the div it sure didn't look good but even EN said on BNN Friday that he thought the cut was

[Pottsy]

Great analysis as usual Q1, thanks, yes I may be too simplistic in my summary. BUT time will tell and as we know things change. Look at today,  China influences, great traders opportunity but will CJ recover or not, I mean the stock is at low of $7.08 with a close of $7.11 but an open of $7.39.  Really. OIL down 2.4%,  This is why I trade. Oil will continue to be volatile. As you

[Quintessential1]

Thanks P.  Actually I think I am starting to come around to yours and Td's view if not my first thoughts. I had originally posted that putting themselves up for sale is a sign of weakness so why a premium? If they can get it for just under $1 per share or perhaps a 1 for 8 share exchange it would be worth it? At 1 for 8 that's about 90 cents a share a CJ current share price and

[JayBanks]

It only cost us $25 Million for GXE... lol Does anyone one know who this actually might have belonged to? Is it just a previously private holding that might have had to run for the exits or needed the cash? They don't do a good job in the initial press releases of identifying the previous holder.

[Pottsy]

Hey buddy, read the info it is a partial acquisition. Not sure how the market will react.    P

[meritmat]

  Unless it's top tier assets don't waste your money.  Gear has nothing 

[egee]

Before results , just before, just after. Gear gets into a potential bidding war at oil prices today .  Kinda great timing on their part

[egee]

Petty cash for the big bois

[tylerreddick]

Bidding war for GXE? Hahahahahahahahaha

[Quintessential1]

GXE was trading at 80 cents a share and moving lower before they announced they were for sale. This could turn out a lot like LB with no bidders or buyers and send the stock down further. That might be a better time to try and make a deal. In the meantime they should be putting out a monthly report in 20 days showing how they did in September.  If it was better and I was GXE I would do my

[Quintessential1]

Why wait 20 days when you can pay BOE to pump it in half the time. https://boereport.com/2023/10/11/gear-energy-post-announcement-asset-review-boe-intel/ In light of the recent tuck-in acquisition, should GXE still be on CJ's shopping list if it ever was at all? I would say CJ is in a better position to negotiate.  It is always better to make a deal when you do not necessarily need to

[Pottsy]

My take Q1, is nada, so much going on, the stock is going to rise and fall for two reasons, oil price and the manipulators. Sorry Bro, just my simple view.   P

[lnggasfor202324]

We should be heading higher with oil prices rising.  I beleive all these oil and gas companies are trading at historical low multiples.  We may also have a short squeeze on are hands.  I sure wouldn't want to be short on any oil company now in fact I hjave options and a boat load of shares.

[meritmat]

well they did buy something

[lashing]

NO CJ doesnt need more "assets" that are short end of life turds