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Equal Energy Ltd. Message Board

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  • nawaralsaadi nawaralsaadi May 21, 2012 12:44 PM Flag

    looks like they have a buyer

    The probability of a full deal or a partial divestiture deal is very high, I would put the odds at over 90%; however no matter how certain a deal is, I would advice against using excessive leverage to double up in the stock.

    I have personally built a very large position in the low $3s; basically at this this level the risk/reward ratio is highly asymmetrical, the stock is not pricing much of upside, thus if a deal does not go through for any reason, the downside is quite limited from current levels, however a partial divestiture of the Canadian assets or a full sale offers 50% to 100% upside within two months.

    Equal doesn't have a blocking shareholder, in such situations it is much easier to get a deal done. The shareholders want to sale, the board want to sale and Scotia is highly motivated to close a deal; other then the highly uncertain macro situation, the only risk I see is the company not getting a proper bid for the Hunton; but this would still entail them selling the Canadian assets (which alone would unlock $2.4 in value) and putting the Hunton/Mississippian in a dividend trust, such a scenario would still be very positive for shareholders.