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GFP.TO - Gale Force Petroleum


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Gale Force is a micro-cap o&g producer trading on TSX Venture. Just wondering if anyone else has looked atit and what your thoughts are? It seems to be trading at a deep discount to value. The Board has recently seen significant changes as a result of an activist fund's prodding.

 

Some recent coverage here http://theenergyharbinger.com/2013/10/08/can-iroquois-fix-gale-force-petroleum/

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I got filled again at 12.5 cents in the name the past Wed/Thu so I thought I'd post up the key points of the thesis for a critique if anyone is interested:

 

  • EV of $19.4m at last traded px of 15 cents on fully diluted (itm) shares + $5.5m of debt
  • PV10 of $47.4m excluding Marcellus acerage
  • 2,007 MBOE reserves excluding Marcellus acerage
  • 37% of PV is attributable to proved developed producing and proved developed not-producing
  • 42% of PV is proved but undeveloped and the rest is probable which management is working to prove
  • Marcellus properties (which are not in the PV10) consist of 10,000 acres, are liquids rich, producing and operated by a large NYSE listed firm... GFP has a 1.1% working interest 
  • GFP currently produces 254 BOEPD

 

As mentioned earlier an activist got involved after management did a few silly things and the board composition has been totally changed now.

 

My simplistic view of the situation is that the EV/PV10 discount to similar Canadian listed peers is too large and if this discount closes a bit the stock is a 2x. The Marcellus properties come along as a free bonus.

 

Oh also the old board had initiated a strategic alternatives process, and engaged an investment bank, some months ago to look into at a sale / merger of the business given the undervaluation. Not sure what the new board does re the process. However hopefully something good will happen over time as I think there are a few different ways to win.

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Quarterly financials released today http://galeforcepetroleum.com/category/financial-and-reserve-reports/

 

Management is still saying "The Company will be seeking to conclude a strategic transaction in the near‐term that will re‐value the Company in the 

market or provide a liquidity event to shareholders at a premium to market."

 

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Management is still saying "The Company will be seeking to conclude a strategic transaction in the near‐term that will re‐value the Company in the

market or provide a liquidity event to shareholders at a premium to market."

 

Have they been saying this for a few quarters?

 

Looking at the share price historically, what happened to this company?

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Management is still saying "The Company will be seeking to conclude a strategic transaction in the near‐term that will re‐value the Company in the

market or provide a liquidity event to shareholders at a premium to market."

 

Have they been saying this for a few quarters?

 

Looking at the share price historically, what happened to this company?

 

They initiated the strategic alternatives process in mid-June and have consistently said that since shortly after that process was started with the caveat being they wanted to prove more of the resource first and complete the sale of the Greg & Rusk properties. I believe that has largely been completed.

 

As a result of the settlement with the activist investor (Iroquois) the board composition has significantly changed, however I understand the sale/ merger process is still underway.

 

Management is certainly incentivised to complete this as they have 3,700,000 options at an exercise price of 15 cents with an expiry date of 23 May, 2014. With where the stock is now they are not going to make any money on these options....

 

What happened to this company? They did some silly things for example took on too much debt imho to acquire acreage.

 

 

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  • 2 months later...

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