Nailed this one. Unfortunately, I hadn’t accumulated a very large position prior to the announcement but a win is still a win. On January 25th, 2012, Crescent Point bought out Wild Stream for $770 million. WSX Shareholders will receive 0.17 shares in CPG, 1 share in a NewCo containing the company’s SW Saskatchewan Viking Assets in the Dodsland, and 0.2 of a common share purchase warrant.
Unfortunately, the negotiated purchase price hasn’t really caused a large pop in the share price but the price paid does seem fair. From Wild Stream’s perspective, I imagine they needed to do this deal given how large the company was becoming and Crescent Point always seemed to be the most prospective buyer. WSX shares will continue to trade until the acquisition closes so the question now becomes – what are they worth?
In my opinion, there is still a lot of upside to Wild Stream’s share price over the ~$9.60 level they’re currently at. The difficulty is that now one has to consider the value of the Crescent Point shares, the value of the NewCo spin-off, and the potential for the deal not going through – though I personally don’t think there is any chance of that happening.
I will write a separate discussion on Crescent Point shortly, so for now let’s focus on the NewCo.
Neil and his team are starting up with 1,000 bbls/d of light oil, and almost 5.5 mmstb of 2P oil reserves. They also have 57,000 net undeveloped acres in the Dodsland Viking. These assets have an expected NAV of around $1.60 per share. Given the success of Neil’s last ventures (Wild River Resources returned 108% over 27 months, and Wild Stream has returned 100% over 28 months). I expect this NewCo will be another excellent investment. This management team has provided exceptional returns on 4 ventures now, and this is an opportunity to get in on the bottom floor of their next one. I expect a significant pop in the NewCo shares as soon as they start trading and since I’m not the management team’s Christmas Card list, the best way to get into the NewCo at its NAV price is to buy Wild Stream now.
Analysts are now targeting around $12.75 and I expect the Wild Stream price to approach this as we approach the expected close on or before March 15th.
I’m going to continue accumulating Wild Stream with the intent to sell off most of the Crescent Point shares after the closing, and pile money into the NewCo once it’s listed.
Though technicals don’t matter much at this point, this chart shows the breakout that occurred and the huge trading volumes since the sale announcement. Lots of people are selling now that the announcement has been made, and I feel this actually presents an excellent buying opportunity and will continue accumulating Wild Stream stock.
