Pine Cliff Energy recently sold a non-core oil asset for C$31M. This asset produced 500 boe per day, which brings us to a price of C$62,000 per flowing barrel.
Not bad as Raging River Exploration recently completed a transaction in the Viking area for C$85,000 per flowing barrel. The premium is understandable as the transaction included more than 100 additional drilling locations.
This sale reduces Pine Cliff’s net debt drastically to C$75M from C$125M in August. This will strengthen the company and allow it to thrive in the uncertainty ahead.
Indeed, while natural gas futures increased in 2017, the outlook for 2018 and beyond turned bearish.
The company will be able to withstand a period of lower natural gas prices with its cleaner balance sheet. Just to remind us:
The current environment of natural gas prices has created opportunities to continue to make value-adding and potentially counter-cyclical acquisitions and Pine Cliff anticipates that it will continue to be able to act quickly on acquisition opportunities identified and to fund these activities from working capital, debt or equity issues.
Source: Pine Cliff Energy’s website
Pine Cliff itself was in trouble in early 2016: management wasn’t thinking about potential value-adding, couter-cyclical acquisitions in April 2016. The cleaner balance sheet will enable Pine Cliff to execute its strategy and withstand price shocks.
Disclosure: I am long PNE. Not for republication on Seeking Alpha.