- The cash flow made by the company in the current oil environment won’t be sufficient for the given capex.
- The weak Colombian peso saves money on operations but this isn’t controlled by the company.
- The company’s management is mediocre with a quick ratio of under 1 for the last three years.
- Altman’s Z-score is under or equal to 1.25 for the last three years, which indicates the company is highly likely to fail.
- The loss of the Rubiales field will surely affect the oil production of the company and therefore its cash flows.
- Shares are priced for a scenario that’s a little more bullish on the oil market than the status quo.
- There is a hard floor of $2.50 per share.
- Buying in the $2.50-$2.60 (CAD) range for each share is a good and relatively safe entry point.
- The balance sheet of the company is flawless.
- The company has enough reserves for over 27 years of operations.
- The NPV of the future cash flow shows an upside of about 75%.
- OPEC nations need a substantial increase in the price of oil to balance their budget.
- The rise of oil production in Saudi Arabia is primarily to cope with the growing domestic oil demand.
- The slowing Chinese economy is the only bearish indicator in the growth of world oil demand.
- Athabasca Oil has substantial cost reductions to undertake on its way to profitability.
- The company paid over $13 per boe for G&A expenses in the first quarter.
- Cost cutting will still bring the G&A expenses at over $7.50 per boe in 2016 on average.
As you may know, I published an article on Seeking Alpha saying that I will sell half of my position in Pacific Rubiales Energy. Now, because of further evidence that the company is much more in trouble than I previously thought, I believe it is time for me to sell the other half of my position in the company.
While the offer made by Alfa and Harbour is fair in my opinion, I believe the offer has really no chance of succeeding. The recent stock movement also indicates that the market believes the offer has no chance of passing the vote.
Therefore, I believe bullish investors should sell their stock now before it is too late. I will publish a detailed article on Seeking Alpha in early July, after my vacations.
Disclosure: I am short PRE.
Remember when I called a sort-term pullback in the price of TransGlobe on April 24? It turned out well, but not for the good reasons.
The stock did break the C$5.40 mark. However, the stock experienced a strong pullback because of the 1Q earnings. Getting technical with stocks can be rewarding. In the end, my reading turned out to be right.
Expect the company to trade in the C$4.80 to C$5.30 range until the fundamentals of the oil market recover. Be patient, it is only a matter of time.
Disclosure: I am long TGL.
- Corridor’s natural gas business in New Brunswick will be profitable, despite the moratorium.
- The company has a pristine balance sheet, with no debt and over $23M in cash.
- It has a quick ratio of over 29, which indicates absolutely no financial pressure in the short term.
- The market is completely ignoring the tremendous Old Harry and Anticosti Island prospects.
- The net present value of the company is $4.95 per share.
- Alfa and Harbour are buying it a little over the fair price of the company.
- Don’t expect Alfa and Harbour to break the bank if the vote fails.
- Astonishing netback of $9 per barrel for a realized price of $47 per barrel.
- Strong balance sheet is perfect for future acquisitions to boost operations in Egypt.
- The oil lifting capabilities of the company will be very beneficial to shareholders.