Wilf GobertArc Resources LtdARX.TOBUYApr 25, 2006

It has been acquired by Shell so should trade according to the acquisition price. He owns Whitecap which is very comparable but smaller. Whitecap is executing at a very high level so should go up with increasing oil prices.

She will sell before the deal is done to avoid the foreign exchange. She prefers other energy names. The deal is 75% Shell stock and 25% cash, but this is a moving target, depending on the price of Shell stock.

Sell immediately, and see his Top Picks. 

Why is SHEL buying ARX? SHEL is symptomatic of the global super-majors -- they're short reserves, so they need to replace inventory base. Doesn't agree with its philosophies on allocating FCF.

Whether to sell now or hold depends on your tax situation. A decent amount is coming via SHEL shares (a more tax-efficient way to get your proceeds). SHEL is quite different from ARX, and an investor will have to decide if they like SHEL prospects. 

Usually in these situations, his team doesn't wait until that last extra drop of return. They like to get their money and put it to use again.

Deal is all but certain to be completed, competing offer not especially likely. He'd hold on and wait for the gap to close between today's price and the offer.

Deal means roughly $8 a share in cash, rest as pro-rated SHEL shares. If you own ARX in a registered account, your capital gain is not taxed. If you own it in a taxable account, you'll be dealing with any consequences in March 2027.

You'll have to look at the cost base on the SHEL shares you receive. Best advice is to use a tax professional.

Simplest approach is to redeploy capital into one of the stronger energy holdings such as CNQ. 

Or put your $$ into an ETF like XEG for diversified exposure. Her team often parks money in a parking spot like this as they do their due diligence on a particular name. Keeps your exposure in the sector until you find a favourite name.

Another option is to look internationally, as Canadian portfolios tend to be heavy on the home bias.

No need to redeploy right this minute. She wouldn't be surprised to see more volatility and another selloff in the next few weeks. Be patient, and wait for a good entry point.

He's not an M&A expert, and he hasn't fully evaluated the deal. The government has to give its stamp of approval when a foreigner comes in to buy a Canadian company. Looking at market behaviour, seems to be some bit of doubt that this deal will go through. He expects it will happen.

If it fails, this stock will come back to the mid-$20s.

Engineering issues, and market's moved away. His firm is willing to look through those and buy at these levels. Longer term, uniquely positioned on natural gas and condensate. 

Using FCF to buy back shares, which is smart given where the share price is. Yield is ~3%, with visibility to growing it.

It's been lucky with the macro. Still struggles with Attachie, which was the growth platform -- take out that project, and the name becomes much gassier. He's frustrated with the gas macro in NA. 

Hopeful that Attachie will get sorted out. He's meeting with management in a couple of weeks for an update. Still reasonable upside of ~40%.

If you own, consider selling for some better names in the short term.

It's in the dog house. It had bad Q4 results last week and Q3 wasn't great either. That said, it holds quality assets, though holds more natural gas than he'd like. Trades at a reasonable 25x PE. Arc would benefit from foreign inflows.

In the penalty box, having some issues developing some of its resources.

They reported earnings a few weeks ago. Decent earnings, but withheld guidance of a new project. Shares dropped 10%, which was way overdone. This new project still has value. Patience will be rewarded. Is adding on this weakness.

Underperformer for a long time. He'd move on, better places to be. It'll take a long time for natural gas to expand in Canada and allow companies to sell at higher prices. Too early for this space. Focus on upper-tier companies such as CNQ. 

Mike isn't a quick-money guy, he's a long-term investor. Sometimes he gets lucky, buying something and it goes up a lot in a short time.

Extremely well run. Likes what it's doing with assets in very safe geographies. Problems with the Attachie property, and the market's soured on the name. That needs to be fixed, and management is capable of that.