He has a window of opportunity to review the books openly...and arrange the cash offer that can reasonably be expected to be excepted...$ 5.25 | $5.40..... And I.ll sell into that offer.
The problem with any new Montclair offer is that it has to rely on the willingness for share holders to accept a low ball share price which may have gained in popularity from the long informationless periods we have experienced over the last year and a half since the start of the strategic review. I have constantly tried to establish for my own holdings what the value of the Equal assets are worth in a non-auction bidding situation. I personally infer there is little demand for Equal Hunton assets as part of a small or mid sized E&P. E&P companies generally indulge in creating high future expectations for their reserve base. Just look at the recent big publicity player Emerald Oil. Lots of Bakken sizzle not much current production and a share base almost like Equal but currently almost twice the share price. As I said long ago with Nawaar, Equal should change their name to Enigma Energy because it does not currently fit any set of E&P expectations.
So what is it worth? I have been guily of looking at very conservative simplistic math and came up with somewhere in the $5.25 to 5.50 area. I now think I may be under valueing the assets as the book value is
4.67/ share and that represents only the capitalized value of the tangible infrastructure and may not adequately include the future earning potential of the proven reserves which by PV-10 updated for the
mid year reserve growth would in itself be $5.25 per share. The question is what is the combnined replacement value of the existing infrstructure and the future earnings potential of the reserves? As a retired engineer I have little insight into the correct answer but currently feel the 5.25 to 5.50 price area may still offer Montclair a huge bargain.
The model for the Hunton assets has already been validated by NEW SOURCE PARTNERS MLP (NSLP). Those assets are best suited for an income generating vehicle (MLP in the United States, Trust in Canada). The Hunton dewatering field has never been and will never be a growth asset, the production of each well is relatively modest and it takes a long time to ramp up, but it is long lasting and slow declining, this is why it is a perfect income asset. Everyone (except Klapko) seems to understand that the Hunton is about income not growth. This is because Klapko is behind the “original sin” of converting this company from an income company into a failed growth company.
The dissidents and NEW SOURCE have already shown the way: restructure as an MLP or Trust, buyback some shares, cut excessive G&A, pay a proper dividend, get a higher share price and acquire more assets with your expensive paper. If Equal would have adopted this model, its share price would be at least $7 a share today, and instead of firing employees to shrink, the company would be hiring staff to grow and develop additional income assets.
Klapko has harmed thousands of shareholders and employees by his erroneous policies. For Equal to prosper this disease of a CEO must go. Equal doesn’t need to remain an enigma, what’s making it an enigma is a failed, selfish and incompetent CEO enabled by complacent board. Remember the majority of shareholders (including the count of the dissident blocked shares) have already voted against this man, he is here despite the wishes of the majority of the owners of this company. Think about that for a moment, this individual and all the legacy board: ARE HERE AGAINST THE WISHES OF THE MAJORITY OF THE OWNERS OF THE COMPANY and they have the audacity to claim that they are here to serve YOUR interests.
It is a disgrace that such abuse and hostage taking of companies is permitted in Canada and the United States.
Montclair's tender can't come soon enough. The troopers at Equal only act when they are under the gun, this board can't decide on an outcome even if their life depended on it. Clearly it will be the market that will make the decision for them. With NEW SOURCE ENERGY hitting an all time high, Montclair can make a fortune buying this thing at $5+ and taking it public as an MLP next year once they merged it with their own Hunton assets and appoint experienced/credible US managers. If I was in Montclair's shoes, I wouldn't let this asset slip, shareholders will let Equal go for an attractive price if this current board and management stay in charge. Opportunities like that comes only once in a life time.
Montclai will eventually remove Klapco.... they hold enough shares now and have the motivation to do so......Klapco will try to save his job wilth an endorsement contract on a friendly deal first.... if that's not in the cards....shareholders might decide with a proxy vote.....any which way..I don't see Montclair selling shares..
If klapko remains the CEO of this company every shareholder should sell into such offer. klapko will run this company into the ground if he remains in charge, shareholders wealth will steadily transfer into his pocket while the business, its employee and shareholders fall behind. Klapko has been a terrible CEO from day one, if it was not for shareholders waking up, this company would have filed for bankruptcy last year. Don't let him destroy what's left of your company, if you can't get an independent board and get rid of him, selling to Montclair at $5+ is the smartest you can make.