On February 14, 2012, Wild Stream Released their Information Circular regarding the Crescent Point Arrangement. I was traveling in Germany at the time so am just now getting around to this blog post.
The basics of the arrangement are that Wild Stream Shareholders will transfer each of their Wild Stream Common Shares to Crescent Point and acquire in exchange:
- 0.17 of a common share of Crescent Point with the understanding that should the arrangement close beyond March 31, 2012 – the share consideration shall increase to 0.17085 to account for the dividend.
- 1 common share of Raging River Exploration Inc.
- 0.2 of a Raging River purchase warrant. Each whole warrant allows the purchase of one (1) Raging River Share for a period of 30 days from the date of issue at the subscription price equal to the price of the Raging River Shares under the proposed private placement (announced to be $1.61).
Raging River will continue with Wild Stream’s approach to growth by acquiring, exploiting and exploring for light oil reserves in Western Canada. The primary assets to be transferred to Raging River pursuant to the Arrangement consist of Wild Stream’s current interest in the Dodsland assets in southwest Saskatchewan. Following the completion of the Arrangement, Raging River will have approximately 1,000 Boe/d of long life, oil weighted production and approximately 5,439 MBoe of proved plus probable reserves as evaluated by independent reserves evaluators effective January 2012.
This is all in-line with what had been previously announced, with the exception of the announcement that newCo will be called Raging River.
Given Crescent Point’s current trading price of $46 (close Feb. 27th), let’s break down the value of Wild Stream shares at present.
$46 x 0.17 Crescent Point Shares = $7.82 (+ $0.04 for March dividend) = $7.86
1 Raging River Share Expected NAV = $1.61
Total = $7.86 + $1.61 = $9.47
Wild Stream Trading Price (Feb. 27th) = $9.86
This leaves a gap of $0.39. I believe the expectation is that Raging River will begin trading at a premium to its valuation given management’s strong track record. This premium will need to be at least $0.325 per share, or 20%, within 30 days (considering the purchas warrants) in order to make the purchase of Wild Stream at these levels a value added proposition. I expect a 15-30% premium will be offered within the first week of trading, thus making the shares still worth a consideration, but not to the same degree as when I recommended this stock 6 weeks ago at the $9 price point.
I look forward to seeing how Raging River performs, and will be watching for their listing closely in the coming weeks, assuming Wild Stream’s March 14th shareholder vote goes well.
