Cardboard Posted May 25, 2018 Share Posted May 25, 2018 If you are looking for a low risk, paid while you wait oil & gas energy investment, with a catalyst, this may just be the ticket. There is currently a fairly large offer of $100,000 at face value of these at $77.50 CAD. The yield on this one is currently 10.3%, is the only debt for this company, there are $41.94 million left at face value following the Dutch auction held in early 2017 and is backed by $79.2 million of Proven Developed Producing NAV. The maturity is coming up in December 2019 giving these a yield to maturity of roughly 45% (27% annualized). By the way, PDP NAV is a really conservative way to value an O&G company. The CEO holds $900,000 of these and bought about half of them around the Dutch auction at around $95. He also holds around 7% of the stock. The company has been in strategic review for a long time and they now openly state that it is too small to remain independent. With the oil price being much better than it was and specifically for them WCS, timing to transact now is pretty good. They have 3 to 4 assets that could be sold independently and their North Dakota asset alone could be worth a large portion of the debentures. They also have $148 million in tax loss carryforwards which you would think picked up value with companies now returning to profitability in the Canadian oil patch. This company has been discussed prior here. For disclosure, I have made a large return on these having bought in the $20's, $30's and $40's when troubles were significant and having sold all of them in the Dutch auction. I re-entered recently and I already own a good sized position at similar prices. Just wanted to point out the opportunity. Cardboard Link to comment Share on other sites More sharing options...
Pondside47 Posted May 25, 2018 Share Posted May 25, 2018 Thanks for sharing the idea. :) Link to comment Share on other sites More sharing options...
Pondside47 Posted May 25, 2018 Share Posted May 25, 2018 If you are looking for a low risk, paid while you wait oil & gas energy investment, with a catalyst, this may just be the ticket. There is currently a fairly large offer of $100,000 at face value of these at $77.50 CAD. The yield on this one is currently 10.3%, is the only debt for this company, there are $41.94 million left at face value following the Dutch auction held in early 2017 and is backed by $79.2 million of Proven Developed Producing NAV. The maturity is coming up in December 2019 giving these a yield to maturity of roughly 45% (27% annualized). By the way, PDP NAV is a really conservative way to value an O&G company. The CEO holds $900,000 of these and bought about half of them around the Dutch auction at around $95. He also holds around 7% of the stock. The company has been in strategic review for a long time and they now openly state that it is too small to remain independent. With the oil price being much better than it was and specifically for them WCS, timing to transact now is pretty good. They have 3 to 4 assets that could be sold independently and their North Dakota asset alone could be worth a large portion of the debentures. They also have $148 million in tax loss carryforwards which you would think picked up value with companies now returning to profitability in the Canadian oil patch. This company has been discussed prior here. For disclosure, I have made a large return on these having bought in the $20's, $30's and $40's when troubles were significant and having sold all of them in the Dutch auction. I re-entered recently and I already own a good sized position at similar prices. Just wanted to point out the opportunity. Cardboard What broker has access to this bond? IB doesn't seem to offer Canadian bond. Link to comment Share on other sites More sharing options...
StubbleJumper Posted May 25, 2018 Share Posted May 25, 2018 If you are looking for a low risk, paid while you wait oil & gas energy investment, with a catalyst, this may just be the ticket. There is currently a fairly large offer of $100,000 at face value of these at $77.50 CAD. The yield on this one is currently 10.3%, is the only debt for this company, there are $41.94 million left at face value following the Dutch auction held in early 2017 and is backed by $79.2 million of Proven Developed Producing NAV. The maturity is coming up in December 2019 giving these a yield to maturity of roughly 45% (27% annualized). By the way, PDP NAV is a really conservative way to value an O&G company. The CEO holds $900,000 of these and bought about half of them around the Dutch auction at around $95. He also holds around 7% of the stock. The company has been in strategic review for a long time and they now openly state that it is too small to remain independent. With the oil price being much better than it was and specifically for them WCS, timing to transact now is pretty good. They have 3 to 4 assets that could be sold independently and their North Dakota asset alone could be worth a large portion of the debentures. They also have $148 million in tax loss carryforwards which you would think picked up value with companies now returning to profitability in the Canadian oil patch. This company has been discussed prior here. For disclosure, I have made a large return on these having bought in the $20's, $30's and $40's when troubles were significant and having sold all of them in the Dutch auction. I re-entered recently and I already own a good sized position at similar prices. Just wanted to point out the opportunity. Cardboard What broker has access to this bond? IB doesn't seem to offer Canadian bond. Isn't it an exchange-traded debenture? Just click "buy" and plunk the ticker symbol into the form? SJ Link to comment Share on other sites More sharing options...
Jurgis Posted May 25, 2018 Share Posted May 25, 2018 You may not be able to buy this if you're in US. Maybe through some IB-fu if someone here knows and tells you how. Link to comment Share on other sites More sharing options...
Pondside47 Posted May 25, 2018 Share Posted May 25, 2018 You may not be able to buy this if you're in US. Maybe through some IB-fu if someone here knows and tells you how. Yea I figured out. I called IB help desk and they told me they can't even find the symbol in their database... Link to comment Share on other sites More sharing options...
winjitsu Posted May 25, 2018 Share Posted May 25, 2018 Yea I figured out. I called IB help desk and they told me they can't even find the symbol in their database... Ditto can't find on Fidelity or Schwab :( Link to comment Share on other sites More sharing options...
Jurgis Posted May 25, 2018 Share Posted May 25, 2018 I asked a question about another Canadian convert on CoBF in the past and got an answer, but my CoBF-fu is weak too so I can't find it. 8) Edit: Found it: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/convertible-bond-yielding-gt-20/10/ Link to comment Share on other sites More sharing options...
havingheart Posted May 25, 2018 Share Posted May 25, 2018 Sorry for the completely newbie question: Is there typically an order minimum when buying debentures like these? When I last looked at the trade history it looked like each transaction was at least 1000, but nothing smaller than that so I'm assuming it's 1000 x $77.50 = $77,500? I'm looking at this https://web.tmxmoney.com/quote.php?qm_symbol=ZAR.DB.A Link to comment Share on other sites More sharing options...
bizaro86 Posted May 25, 2018 Share Posted May 25, 2018 The 1000 means $1000 here, so the minimum trade is ~$780 CAD. You cant get them through IB. Link to comment Share on other sites More sharing options...
wisowis Posted May 26, 2018 Share Posted May 26, 2018 What is the downside risk? Link to comment Share on other sites More sharing options...
rukawa Posted May 27, 2018 Share Posted May 27, 2018 The 1000 means $1000 here, so the minimum trade is ~$780 CAD. You cant get them through IB. Questrade has them. TD does too....as I guess do all the big banks. Link to comment Share on other sites More sharing options...
havingheart Posted May 27, 2018 Share Posted May 27, 2018 Thank you! Link to comment Share on other sites More sharing options...
doc75 Posted May 30, 2018 Share Posted May 30, 2018 What is the downside risk? Bought some more today at 76.50. Downside risk: They don't have a bank line and are running pretty thin on cash. They've been pretty clear for over a year that strategic alternatives are on the table. Wording to that effect in their recent investor presentation has become even more explicit. But nothing has happened yet and insiders continue to sell the common, so I presume the pricing just reflects market skepticism. My fear is that they wait too long (e.g. for hedges to roll off or whatever), oil heads down from here and they miss the opportunity to sell assets at a reasonable price. Just my very unsophisticated take. Link to comment Share on other sites More sharing options...
Pondside47 Posted May 30, 2018 Share Posted May 30, 2018 The 1000 means $1000 here, so the minimum trade is ~$780 CAD. You cant get them through IB. Questrade has them. TD does too....as I guess do all the big banks. So I can't find the ticker on TDAmeritrade's website. Do you know if I need to call their customer help desk? Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 30, 2018 Share Posted May 30, 2018 The 1000 means $1000 here, so the minimum trade is ~$780 CAD. You cant get them through IB. Questrade has them. TD does too....as I guess do all the big banks. So I can't find the ticker on TDAmeritrade's website. Do you know if I need to call their customer help desk? I think you can only buy them in Canada unless you are an institution Link to comment Share on other sites More sharing options...
StubbleJumper Posted May 30, 2018 Share Posted May 30, 2018 The 1000 means $1000 here, so the minimum trade is ~$780 CAD. You cant get them through IB. Questrade has them. TD does too....as I guess do all the big banks. So I can't find the ticker on TDAmeritrade's website. Do you know if I need to call their customer help desk? I think you can only buy them in Canada unless you are an institution It's just like Red Rose tea: "Only available in Canada, you say? Pity." Link to comment Share on other sites More sharing options...
Philbert77 Posted September 29, 2018 Share Posted September 29, 2018 Any fresh perspectives on Zargon? I purchase some debentures at $78 but the price continues to slip. It seems odd that with the price of oil right now they could not get bought out... Link to comment Share on other sites More sharing options...
bizaro86 Posted September 29, 2018 Share Posted September 29, 2018 Any fresh perspectives on Zargon? I purchase some debentures at $78 but the price continues to slip. It seems odd that with the price of oil right now they could not get bought out... I own these. Their production has been declining. I think the market for assets is relatively weak, so I'm not surprised they haven't sold I think these are probably eventually money good. They could probably get a bank line to take out most of them if push came to shove, although I expect these will continue to get extended until they sell the business. Link to comment Share on other sites More sharing options...
Cardboard Posted October 2, 2018 Author Share Posted October 2, 2018 Opportunity to acquire in the low $0.60's today. I bought some more. Yield close to 13%. WCS currently is not really any worst than it was in Q1 at U.S. $38.59/bl and the average for Q3 should be above Q1 with $46.60 in July and $39.32 in August. Therefore, with their poor hedges having mostly expired at the end of Q2, results should not be that different from Q2 IMO. They still have time to refinance these and we have seen what happened recently with Fortress Global. And worst case scenario, the debentures will be converted and holders will own the company. At $0.62 on the dollar, it seems to be well backed by its assets. The WCS crisis will also end someday and refineries in the Gulf area continue to need heavy. With Syncrude restarting, Fort Hills ramping up, a very large refinery offline for maintenance in the MidWest and negative sentiment around TransMountain, you had the perfect recipe for a big selloff. Line 3 is going ahead, there is discussion around reversing Line 13, removing "air" barrels or unused capacity from existing pipelines, even good old Keystone XL is starting construction next year. Some large crude-by-rail deals have been announced recently such as Cenovus planning to ship 100,000 bls/day. This is a really big number by the way and others are following suit. Cardboard Link to comment Share on other sites More sharing options...
doc75 Posted October 2, 2018 Share Posted October 2, 2018 Opportunity to acquire in the low $0.60's today. I bought some more. Yield close to 13%. WCS currently is not really any worst than it was in Q1 at U.S. $38.59/bl and the average for Q3 should be above Q1 with $46.60 in July and $39.32 in August. Therefore, with their poor hedges having mostly expired at the end of Q2, results should not be that different from Q2 IMO. They still have time to refinance these and we have seen what happened recently with Fortress Global. And worst case scenario, the debentures will be converted and holders will own the company. At $0.62 on the dollar, it seems to be well backed by its assets. The WCS crisis will also end someday and refineries in the Gulf area continue to need heavy. With Syncrude restarting, Fort Hills ramping up, a very large refinery offline for maintenance in the MidWest and negative sentiment around TransMountain, you had the perfect recipe for a big selloff. Line 3 is going ahead, there is discussion around reversing Line 13, removing "air" barrels or unused capacity from existing pipelines, even good old Keystone XL is starting construction next year. Some large crude-by-rail deals have been announced recently such as Cenovus planning to ship 100,000 bls/day. This is a really big number by the way and others are following suit. Cardboard Thanks for your thoughts. I hold some with a cost basis in the high 70s and have been thinking about adding at these levels. Link to comment Share on other sites More sharing options...
Philbert77 Posted October 3, 2018 Share Posted October 3, 2018 I picked up some more today at $64. We'll see how it goes. Link to comment Share on other sites More sharing options...
Philbert77 Posted October 10, 2018 Share Posted October 10, 2018 Well these debbies are sure tanking... I should have waited longer to purchase. Link to comment Share on other sites More sharing options...
Philbert77 Posted November 3, 2018 Share Posted November 3, 2018 CALGARY, Alberta, Nov. 02, 2018 (GLOBE NEWSWIRE) -- Zargon Oil & Gas Ltd. (“Zargon” or the “Company”) announces that it has entered into a financing agreement for $3.5 million (USD) term debt with private investment funds advised by JGB Capital Management, LP. The proceeds of the financing will be utilized for low risk oil exploitation capital projects and general corporate purposes. The loan is secured by all U.S. assets of Zargon. The loan bears interest at 11% and principal repayments commence July 1, 2019 at $50,000 (USD) per month until September 1, 2019 and on October 1, 2019 principal repayments will be $75,000 (USD) per month until maturity at April 1, 2020 when the balance of the principal plus an original issue discount of $145,833 (USD) is payable. If certain US production or cash flow minimums are not achieved repayment could be accelerated. Athena Capital Markets Ltd. acted as the financial advisor on this transaction. https://globenewswire.com/news-release/2018/11/02/1642276/0/en/Zargon-Oil-Gas-Ltd-Announces-Financing-Agreement-for-3-5-Million-USD-Term-Debt.html So is this just "keep the lights on money"? Any thoughts on the odds of debenture holders getting out of this one without losing their shirts? Link to comment Share on other sites More sharing options...
grym02 Posted November 21, 2018 Share Posted November 21, 2018 Zargon Announces a Proposed Transaction to Restructure its Convertible Debentures https://zargon.gcs-web.com/node/7666/pdf Why would debenture holders accept this proposal vs. getting another 15 months of interest and receiving shares in Dec 2019? Link to comment Share on other sites More sharing options...
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