Opinions
Greg Newman
Bonavista Energy Corp
BNP-T
COMMENT
Jun 16, 2017
$2.430
Stock price when the opinion was issued
oil
gas
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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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71% natural gas. Obviously, there are concerns about energy. They’ve increased their asset concentration, lowered their costs. Q1 was good and their growth rate is pretty good. Very cheap relative to its peers. The only reason he wouldn’t buy this, if he were interested in an energy name, is that the balance sheet, although better than its peers, it is not ironclad or best of breed. Their 2018 production he models as still lower than that which they printed in 2014.