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PRD - PRD Energy Inc.

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Cardboard Newbie

Cardboard

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A liquidation play available for 75% of its cash assets.

 

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aPRD-2356718&symbol=PRD&region=C

 

The stock is selling for $0.065 and they should distribute roughly $0.0875. The German assets have been sold and all is left to do is to dissolve the foreign company which should be completed in October. Management's idea was to look for a strategic alternative that would be accretive to shareholders until the end of Q1 and then to liquidate the company if nothing materialized. We are pretty much left with that option.

 

To distribute the cash via a return of capital instead of a dividend which is taxable, all they need to do is to restate capital surplus via a proposal to shareholders. The AGM timing is coming up so they can get that approved and also authorize a distribution for the majority of the cash, then liquidate what is left of the company.

 

Michael Greenwood (Chairman and CEO) owns 17.8% of the company and based on the disclosure, a liquidation seems to be the direction at this point.

 

Cardboard

 

 

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wachtwoord Newbie

wachtwoord

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Nice find!

 

Does this get taxed as effectively connected income (ECI) to foreign investors just like US MLPs? That tax rate is 39.5% (and I only get 15% back) so that would make this not applicable for most foreign investors.

 

If it's treated as an ordibary dividend it's free to me so that would be nice. Any idea?

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wachtwoord Newbie

wachtwoord

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Indeed they could. They sold all their fixed assets though and don't have intangibles on the balance sheet. Appearently they had knowledge in analyzing uneconomical energy deposits in central Europe and had an in-house methodology for it. Maybe some company wants to acquire that? Other than that closing of the company is the only logical next step. Let's hope they burn through as little money as possible in the meanwhile.

 

Anyway, I sized it occordingly (as obviously my knowledge about the company is limited).

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wachtwoord Newbie

wachtwoord

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Not much news but this was files on the 19th (attached). They indeed don't seem to be burning much cash (in the first 3 months of 2016  it was $160k but cash flow was more negative).

 

The Company's Special Committee, comprised of Daryl Gilbert, Terry McCoy and Bill Shupe, is actively

working with FirstEnergy Capital Corp. to identify and evaluate strategic alternatives available to the

Company. The Special Committee is seeking a transaction that has the potential to be highly accretive

for PRD shareholders’ and is not subject to a continuing refinancing risk. PRD cautions that there are no

guarantees that the review of strategic alternatives will result in a transaction, or if a transaction is

undertaken, as to its terms. If a suitable transaction cannot be identified by the end of the first half of

2016, the Special Committee may propose returning the remaining capital in the Company to the

shareholders. The Company does not expect to make any further public comments regarding the review

unless the Special Committee approves a specific action.

 

At the Company's request, the TSXV has delayed the transfer of the Company’s listing to the NEX

provided that the Company keep the TSXV apprised of the status of its ongoing strategic alternatives

process.

CheckCode.pdf

GetFile.pdf

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Cardboard Newbie

Cardboard

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Yeah, they annoy me a bit here. This is what was written in year end's documents:

 

"If a suitable transaction cannot be identified by the end of the first quarter of

2016, the Special Committee may propose returning the remaining capital in the Company to the

shareholders."

 

Now they use the exact same sentence replacing first quarter by first half. We were told in the March 23 press release that this process would continue for a little further and that return of capital would be studied in greater details. Maybe that some deal was in the work at the end of the first quarter requiring an extension. However, the "may propose" should now be dropped by "will propose" following a 3 month delay.

 

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sbalsam Newbie

sbalsam

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The Information Circular (dated July 26 but filed August 2 on SEDAR) provides that "the Board expects that PRD Shareholders will receive cash distributions for an aggregate amount of approximately $0.08 per PRD Share held based on 143,908,116 PRD shares issued and outstanding." Like others here, I had estimated the the payout to be higher.

Steve

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sculpin Newbie

sculpin

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They should have merged with an E&P with quality assets that needed cash. Would have most likely resulted in PRD shareholders having much more upside than this liquidation. This appears to be the strategy between Marquee and AOS (both halted).

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wachtwoord Newbie

wachtwoord

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Shareholders voted in favor of dissolving and it will be de-listed September 1st.

 

http://web.tmxmoney.com/article.php?newsid=7495333669102224&qm_symbol=PRD

 

So unless someone pay met 0.085 for my shares I'll hold them into liquidation. I guess I'll figure out whether there really aren't any applicable taxes for me (a Dutch citizen) in the process. if there aren't any taxes (as I expect) and total proceeds of 0.084 I'll have made 23.7%. Quite a nice return considering the holding time.

 

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wachtwoord Newbie

wachtwoord

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Does anyone have experience when I can expect the proceeds to be available in my account? Should I expect it by the end of the trading day?

 

The PRD cash showed up in my account this morning. Hope yours came in too!

 

Not yet unfortunately. I use Interactive Brokers. Thanks for letting me know your cash came in!

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wachtwoord Newbie

wachtwoord

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The cash came in for me as well. Thus far there is no tax charge on it as I expected and hoped (although MLP taxes came in more than a year late).

 

Not sure about the US or foreign rules but if you are a Canadian resident, its a return of capital according to the circular. Anything above your ACB is a capital gain.

 

I know, but my country does not impose those taxes other than a wealth fee relative to total wealth paid each year.

 

I received a large (40%) bill for MLP distributions from my broker 12-18 months after receiving them so I still see Canada doing this as an option. Likely this won't happen.

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wachtwoord Newbie

wachtwoord

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I emailed the vice president (Graeme Ryder) at his new job. He replied quickly, gracefully and in detail. In short: they are still winding down the business in Germany and hope to finish the whole process in 2017. They are also still reporting and can be found on sedar.com (I wasn't aware of that).

 

Sometimes small companies get it right when dealing with shareholders :)

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