Petrobank (PBG) announced this week that they will be spinning out their ownership in Petrobakken to their shareholders in a tax free move on December 31st. Each share of PBG currently entitles you to 1.1 shares of Petrobakken and the THAI assets that are currently producing in small quantities. PBG rallied on the news, but only to a value of 1.1 times Petrobakken. The shares are still pricing in $0.00 value for the stubco on the spinout.
The stubco will begin trading with $100 million in cash, no debt, and some assets producing oil using THAI. With roughly 100 mm shares on PBG outstanding, and the market giving no value to THAI, it should still trade at $1 on Jan 1st. So there is still time to put the trade on and make a small risk free gain over the next 2 months.
PBG held a conference call to discuss the spinout and at the same time updated the progress at their Kerrobert THAI oilfield. Current production was extremely disappointing, coming in around 300boe/d over the last few weeks, after peaking at 400 in early august. However, in the Q&A session of the call, they said they expect it to reach 1000boe/d in well under 6 months. The wells have never shown the ability to produce near those levels after 1 year, but management has always claimed that they were taking it extremely slow. If they can gte to those rates by February, the stubco will have to reflect that production into its price. A rough calculation is to value flowing barrels with decent reserves around $80,000 per barrel. This would be another .80 for the stubco, giving it a value of about $2. So im still recommending the trade, even after the first $2 part of the move was closed this week.