Opinions
Jeff Young
Bonavista Energy Corp
BNP-T
COMMENT
Dec 08, 2015
$1.890
Stock price when the opinion was issued
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SELL
From a trading perspective you can take a shot and buy it. But you want to flip it. It is not as cheap for the risk. Balance sheet is heavy with net debt over cash flow is 5.3 (you don't want to be over 3) They have bigger problems. Tough one. The Management has skin in the game but their balance sheet problems are very big.
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SELL
What to do with the Bonavista debt deal? https://globalnews.ca/news/7088006/bonavista-energy-calgary-company/ A sad ending to a good company with fine assets and managers. Problem was that their debt was maturing in November 2020 and debt holders refused to extend that debt two-three years. BNP also couldn't get debt relief from EDC or BDC. For shareholders, it's a tough choice now. You have three options: 1) you can wait for the 5 cents after shareholders vote in July, 2) sell in the open market now at 7.5 cents, or 3) own a part of this as a private company with no liquidity or trading value until there's an exit strategy 3-4 years later. He will sell (option 2).
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The company is doing the right things. Their assets are good. They are just caught in this malaise of the price of gas. The longer that goes on, the more difficult it is for them to survive. Doesn’t see any immediate threat, but is now focusing on what he considers to be safer bets.