Opinions
Mason Granger
Bonavista Energy Corp
BNP-T
COMMENT
Mar 17, 2016
$3.010
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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Likes management, the company, what they have done and the philosophy on how they have conducted their business. They go into plays, dominate them, control all of the infrastructure and drive costs down, which is exactly what he likes. Their Glauconite play that they bought off Encana years ago turned out to be excellent for them. The problem was their exposure to weak natural gas liquids pricing, which has collapsed. Also, the balance sheet had more debt than what he is comfortable with. Dividend yield of 3.99%.