Undervalued Oil & Gas Explorer, Near Developer Makes Solid Takeout Target

Source: Streetwise Reports 10/16/2018 A Pareto Securities note explained what the company has to offer, why it is attractive and what it could gain from an M&A-type deal. In an Oct. 12 research report, analyst Tom Erik Kristiansen with Pareto Securities noted that Blackbird Energy Inc. (BBI:TSX.V) is an ideal takeout candidate, it is the right time in the cycle for mergers and acquisitions (M&A) activity, and such a transaction could help finance the company for project advancement and spark a repricing of its stock. Kristiansen summarized Blackbird’s highlights. It offers a “high-margin, development-ready portfolio” in the liquids-rich Montney Formation, Kristiansen wrote. Drill results to date have exceeded expectations. The company’s operational netback last quarter was ahead of its peers, at CA$30 barrels of oil equivalent, which “highlights the attractiveness of its acreage in the current oil price environment.” Blackbird is undervalued and “too cheap to ignore,” Kristiansen reiterated. Whereas Blackbird is trading at CA$2 million per section, its peers are trading around CA$12 million/section. This is largely because weak sentiment for oil and gas in Canada is keeping investors out of the sector. Several M&A transactions have occurred as a result, the analyst added, and such a deal makes sense for Blackbird. Moving forward for Blackbird would entail increasing production to about 7,000 barrels of oil equivalent per day (7 Mboe/d) from the current 1–2 Mboe/d, once it obtained additional offtake capacity. To do so, however, it would need about CA$40–80 million, Kristiansen indicated, “dependent on its participation in … Continue reading

Analyst: Canadian Oil & Gas Company 'Crazy Cheap'

Source: Streetwise Reports 10/16/2018 A Mackie Research Capital Corp. report outlined this Canadian energy firm’s recently completed financing and its in-process acquisition. In an Oct. 15 research note, analyst Bill Newman reported that Prairie Provident Resources Inc. (PPR:TSX) is currently “crazy cheap,” after raising gross proceeds of CA$5.5 million in a bought-deal financing and agreeing to acquire an oil and gas company. Newman explained that the financing consisted of 3.8 million flow-through shares and 9.6 million subscription receipts. The receipts will be converted into Prairie Provident units of one share plus half of a warrant when the company’s acquisition of Marquee Energy Ltd. closes in November 2018. Also, Prairie Provident will get a credit line increase to US$65 million with about US$21 million undrawn, “providing additional financial flexibility,” he noted. As for the company’s acquisition of Marquee, it is a “crazy cheap” deal that “boosts cash flow and opportunity base,” Newman pointed out. Prairie Provident will pay about $55 million in stock and assumed debt for Marquee’s roughly 2,700 barrels of oil equivalent per day (2,700 boe/d) of low-decline, high-netback production, along with 209,688 acres of land in central Alberta and a development-ready Banff oil play, providing “a large inventory of development locations to fuel lower risk production growth for many years,” the analyst added. The additional production would boost Prairie’s total to about 7,700 boe/d, and would increase its Proven reserves an estimated 97% and 2P reserves by about 110%, to 28.3 million barrels of oil equivalent (28.3 MMboe) … Continue reading

Energy Firm Acquiring Oil & Gas Assets Extends Closing and Option Dates

Source: Streetwise Reports 10/12/2018 The company relayed the recent changes made to its existing agreements for Eagle Ford assets in South Texas. Oracle Energy Corp.’s (OEC:TSX.V; OECCF:OTC) wholly owned subsidiary Oracle Oil and Gas extended the dates of two existing agreements, one for its acquisition of Eagle Ford assets, the other for its purchase of mineral rights on adjoining acreage. Regarding acquisition of the Eagle Ford assets, called the HBP assets, Oracle and a private owner agreed in an amendment to push back the closing date by six months, to March 29, 2019, from Sept. 28, 2018. They also agreed to delay the effective date to Jan. 1, 2019, from July 1, 2018. Pursuant to the amendment reflecting those changes, Oracle must deposit another $250,000 in cash before Oct. 31, 2018, which is to be applied toward the purchase price. Earlier in the year, Oracle agreed to acquire a 100% working interest and a 74% net revenue interest in those HPB assets, which encompass 2,490 acres of oil and gas leases, six wells currently producing 80 barrels of oil equivalent per day, seven shut-in wells and the existing production infrastructure on the properties. In other news, Oracle initiated an amendment to the May 2019 option agreement in which it agreed to acquire the mineral rights on 5,000 net acres adjoining the HBP assets. The recently signed amendment called for extending the period for the option to be exercised to Jan. 15, 2019. That is contingent upon on three conditions. Oracle … Continue reading

Energy Companies' Merger to Create 'World's Largest Offshore Drilling Fleet'

Source: Streetwise Reports 10/11/2018 A Raymond James report described the expected synergies of this proposed transaction. In an Oct. 9 research note, analyst Praveen Narra reported that Ensco Plc (NYSE:ESV) and Rowan Companies Plc (RDC:NYSE) agreed to merge “in an all-stock transaction that will result in the largest offshore drilling rig fleet.” Narra added that “despite a lack of premium to either party, it does appear to be positive for shareholders with the value creation expected to be driven by synergy realization.” In the transaction, Rowan shareholders would receive 2.215 Ensco shares for every Rowan share. Narra reviewed the positive highlights of the proposed merger. For one, the combined fleet, becoming the world’s largest, would pose a “dual threat in floaters and jackups.” The combined entity’s assets would encompass 82 rigs, roughly $2.7 billion in backlogged contracts and about $3.9 billion in liquidity, all for an estimated pro forma enterprise value of about $12 billion. The combined fleet would include 54 jackups and 28 floaters, and its 11 tier 1 capable floaters would mean it would control 50% of all of them, Narra relayed. The deal would allow Rowan to capitalize on Ensco’s broader floater footprint and keep its drill ships busier, as they’re not needed for backlogged work and located in the Gulf of Mexico. With respect to jackups, the combined company would instantly gain market share in certain geographies, specifically 40% of jackups in Saudi Arabia and 30% in the North Sea. “Given the significant market share as … Continue reading

Lithium Company Files PEA on Argentina Project

Source: Streetwise Reports 10/11/2018 The report provides support to proceed with development plans. Advantage Lithium Corp. (AAL:TSX.V; AVLIF:OTCQX) announced the filing on SEDAR of its Preliminary Economic Assessment (PEA) report following summary results announced on August 14, 2018. The company stated that the PEA report provides support for Advantage Lithium to “proceed with development plans for 20ktpa capacity stand-alone Lithium Carbonate plant located at its Cauchari Joint-Venture project in the province of Jujuy, Argentina.” The company noted the following key points: US$830 Million after-tax Net Present Value at 8% discount rate and Internal Rate of Return of 24.0 % for 20,000 Tons per year production of lithium carbonate. (Pre-Tax Net Present Value – $1,321 Million) Pre-production Capital Expenditure estimate of US$ 401 million for a 20,000 Tons Per Year operation Operating Expenses of $3,667/ton of lithium carbonate average after production ramp-up Processing facilities design based on proven solar evaporation technology and conventional lithium brine processing, leveraging JV partner Orocobre Ltd.’s (ORL:TSX; ORE:ASX) project development experience Mine life of 25 years including a 3-year ramp up for 20,000 tons per year production scenario based on conversion factors applied to 3 Metric Tons resource published in May 2018 Cauchari resource conversion to Measured and Indicated well underway with DFS to commence imminently with completion scheduled in Q2 2019, both fully funded by the AAL/Orocobre Joint Venture The resource is open to the south and at depth, with potential to add significant tonnage with additional exploration, including in the deep sand unit David … Continue reading

Texas Oil & Gas Company's Permian Wells Produce Encouraging Results

Source: Streetwise Reports 10/09/2018 This Texas E&P firm is having success using new well testing techniques. Amazing Energy Oil & Gas Co.’s (AMAZ:OTCQX) CEO, Willard McAndrew III, reported that the company achieved “effective” outcomes from recent drilling and completing of the new #30 well on its Permian Basin acreage using the open hole technique. “We are very encouraged by the results of our drilling efforts and newly employed completion techniques,” he said in a news release. With the #30 well, drilled to a depth of 1,768 feet, the company “encountered approximately 14 feet of pay zone thickness based on comparison to a southern offset well,” along with “two benches of the Queen A formation,” the news release noted. After completion, the natural pressure in #30 swelled overnight, then oil began to flow. Now, without stimulation, the well is producing about 30 barrels of oil per day. Amazing will continue well testing to determine its stabilized initial potential production rate. In the release, the CEO highlighted that the company invested more than $1 million over the past year on “testing cores, a Halliburton rock vision log, rock and fluid property testing with special core analysis and new test wells.” These new techniques, he said, produce improved results and lower Amazing’s average well cost, thereby improving operational economics well by well. McAndrew added, “We are committed to building value through the drill bit and controlling costs. Amazing will continue to communicate our measured results to investors as we progress, and we look … Continue reading

Two Companies with Nevada Lithium Deposits Plan Joint Venture

Source: Streetwise Reports 10/06/2018 The close proximity of two properties offers promise of synergies for these firms. With an eye toward partnering in a joint venture (JV), Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE) signed a nonbinding letter of intent with Dajin Resources Corp. (DJI:TSX.V; DJIFF:OTCPK) concerning Dajin’s Alkali Spring Valley lithium property in Nevada, 12 kilometers from Cypress’ Clayton Valley lithium project. Under the agreement, Cypress gains the exclusive right and option to acquire a 50% interest in Dajin’s 145 unpatented mining claims at Alkali Spring Valley, as well as its application for 1,000-acre-feet per year of water rights in Nevada’s Esmeralda County. In exchange, Cypress will give Dajin 150,000 Cypress shares plus $50,000. Cypress has two years to complete its earn-in, which requires issuing another 150,000 Cypress shares to Dajin, and spending $200,000 on exploration at Alkali Spring Valley in year one and $250,000 in year two. Following that two-year period, the two companies will establish the JV. If Dajin does not want to participate in the JV at that point, it may “dilute to a 10% net profits’ interest on the value of the JV property in Alkali Spring Valley,” a news release explained. The next steps are for Cypress to perform due diligence on Dajin and draft a definitive agreement for the deal. Once those are done and the TSX Venture Exchange approves the transaction, Cypress will compensate Dajin with the above mentioned shares and cash. After the JV is in place, Cypress and Dajin will “share … Continue reading

Canadian Oil & Gas Firm 'Too Cheap to Ignore'

Source: Streetwise Reports 10/06/2018 A Pareto Securities report highlighted the disconnect between this energy company’s current share price and where it should be. An Oct. 3 research note by analyst Tom Eric Kristiansen pointed out a “valuation mystery in Blackbird Energy Inc. (BBI:TSX.V), which continues to be priced at a large discount to peers and is the most obvious takeover candidate in our coverage universe.” The company is currently trading at CA$0.35 per share. Pareto’s target price on Blackbird is more than three times that, at CA$1.10 per share. “We view Blackbird as too cheap to ignore and reiterate our Buy,” Kristiansen wrote. The analyst offered arguments for why the company should be valued higher. Its year-end financials, as of July 30, 2018, were as expected. Management has guided to near-term production of 2,000 barrels of oil equivalent per day (2 Mboe/d), an increase from 1.148 Mboe/d. “More important,” the analyst noted, “Blackbird delivers an industry leading operational netback of CA$30 per barrel of oil equivalent (CA$30/boe).” It is the highest among its peers, as demonstrated in the graph Kristiansen included in his report, which compares the group on this metric. Seven G’s netback is CA$29/boe, and NuVista’s is CA$24/boe. The lowest is Birchcliff’s at CA$13/boe. Yet, as shown by Kristiansen, despite having the highest netback per boe, Blackbird has the lowest enterprise value per section of land owned, at CA$2.1 million, as depicted on the same graph. NuVista has the highest, at CA$12.4 million/section; QEC’s is CA$11.9 million/section; and … Continue reading

Cobalt Development Firm Changes President/CEO at Critical Juncture

Source: Streetwise Reports 10/04/2018 Two analysts relayed the relevant background of the newly appointed executive and shared their thoughts about the timing of the replacement. In a Sept. 27 research note, Eric Zaunscherb, a Canaccord Genuity analyst, reported that eCobalt Solutions Inc.’s (ECS:TSX; ECSIF:OTCQX; ECO:FSE) president/CEO, Paul Farquharson, was retiring as of Oct. 1, 2018, and Michael Callahan was assuming those positions. Farquharson, however, will be present through year-end 2018 to assist through the transition. “Callahan’s appointment comes after several months of planning, and he is taking the helm at a pivotal time for eCobalt as it advances the Idaho cobalt project toward production,” Zaunscherb noted. The new president and CEO, an Idaho native, will oversee the release of the optimized feasibility study (OFS) of Idaho, expected in October, and resume project financing discussions. “Going forward, Callahan will oversee the release of the optimized feasibility study, planned for October 2018, and continue project financing discussions,” wrote Zaunscherb. As for Callahan’s experience in the mining industry, he most recently was the president of Western Pacific Resources, moving into the CEO role in 2014. While there, he “oversaw restructuring activities in a challenging market as the company focused on rehabilitating and exploring the Deer Trail Mine in Utah,” Zaunscherb relayed. Prior to that, starting in 2009, Callahan, as president, grew Silvermex Resources Inc. from a $12 million junior explorer into a $175 million gold-silver producer, and left when First Majestic Silver acquired it in 2012. For the 20 years between 1989 and … Continue reading

How Commodities Will Perform in the 'Impending Massive Credit Crunch'

Source: Clive Maund for Streetwise Reports 10/03/2018 Technical analyst Clive Maund looks at the factors that he sees are behind a massive credit crunch and discusses how the markets could react. An enormous “sword of Damocles” hangs over all markets now. A massive liquidity drain is underway as global QE reverses into QT and rates rise against the background of immense ubiquitous crippling debt burdens. What this means is that the biggest credit crunch of all time is bearing down on us, which will involve markets crashing in the absence of bids, serious dislocation of capital markets and out of control interest rates. This is probably the high point for Trump’s presidency as the stock market enjoys its final “swansong rally” ahead of the crash, buoyed up the last of the stock buybacks before rising rates choke them off, and the dumbest of the dumb money who think that because the market has been in an uptrend for years it’s going to continue. The Fed has been playing a stealth game for a long time now, gradually but steadily raising rates and hoping that the market won’t notice, and also furtively offloading its Treasury hoard, and other central banks are following the Fed’s lead and doing likewise. The liquidity that drove the massive bubbles in real estate and stock markets is being pulled. That must inevitably lead to these markets dropping, and we are already seeing the start of it with the Emerging Markets plunging and hitherto red hot real … Continue reading