Leucrotta Exploration Inc. (LXE:TSX.V; LCRTF:OTCMKTS) announced it is selling the company to Vermillion Energy for CA$1.73 per share in cash and will create a new Montney Formation-focused mining entity, reported Haywood Securities analyst Christopher Jones in a March 29 research note.
"Relative to completed transactions in neighboring properties in northeast British Columbia, we view the transaction metrics [as] attractive," Jones wrote.
In light of both pieces of news, Haywood changed its rating on Leucrotta to Tender from Buy and lowered its target price on the company to CA$2 per share from CA$2.10. (The oil and gas company's current share price is CA$1.95.)
The value to Leucrotta shareholders of the sale is a 41% cash premium to the company's 10-day volume-weighted average price (VWAP), and for the sale and the newco, it is a 63% premium to the 10-day VWAP, or CA$2 per share.
With respect to the newco, Leucrotta shareholders will receive one common share of it, valued at CA$0.27. They also will get 0.1917 of a common share purchase warrant, with which they may acquire one newco common share for CA$0.27.
Not included in the sale, and thus Leucrotta will retain and own in the newco, are about 140 net contiguous sections (out of its existing 240) of the Montney Formation. This acreage at Two Rivers that it will hold onto produces about 400 barrels of oil equivalent per day (400 boe/d).
The new entity, to be headed by Leucrotta's current management team, will be well funded. After closing of the company sale, expected by the end of July 2022, Vermillion will buy a roughly 12.5% interest in the newco for about CA$14 million (CA$14M) and representation on its board.
Further, certain officers and directors will purchase, as already agreed to, 27.8M units of the newco for CA$7.5M.
"Assuming ExploreCo receives maximum value from all the above financings, the new entity will have about CA$80M in cash and no debt," wrote Jones. It will be "well-positioned to capitalize on increased gas demand with LNG Canada in coming years."
This capital will allow the newco to advance to the development phase. Leucrotta's management estimates it will expand the new entity's production to 30,000 boe/d within five years.
Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures For Haywood Securities Inc., Leucrotta Exploration Inc., March 29, 2022
This report is intended for institutional investors and may only be distributed to non-institutional US clients in the following states: nil. Otherwise, this report may only be distributed into those states with an institutional buyer state securities registration exemption.
Analyst Certification: I, Christopher Jones, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Of the companies included in the report the following Important Disclosures apply:
- As of the end of the month immediately preceding this publication either Haywood Securities, Inc., one of its subsidiaries, its officers or directors beneficially owned 1% or more of Pine Cliff Energy Ltd. (PNE-T).
- Haywood Securities, Inc. has reviewed lead projects of Pieridae Energy Ltd. (PEA-V) and a portion of the expenses for this travel may have been reimbursed by the issuer.
- Haywood Securities Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Spartan Delta Corp. (SDE-V) in the last 12 months.
- Haywood Securities, Inc. pro group holdings exceed 10% of the issued and outstanding shares of Leucrotta Exploration Inc. (LXE-V). Distribution of Ratings (as of March 29, 2022)
Link to Research Policy: http://haywood.com/what-we-offer/research/research-policy
Member of the Canadian Investor Protection Fund
