Sonde Resources (NYSEMKT:SOQ) recently put out a press release saying that it is providing access to the sales materials for its sales process in Western Canada on its website. As I am a shareholder in Sonde (and have written about it here on SeekingAlpha), I followed the link and noticed something remarkable.
Previously, I had expected Sonde to sell its existing production, spin out its North African asset, and keep its unconventional assets. I wrote about that here. Apparently I was wrong - while Sonde may do that, it is currently listing all of its assets in Canada for sale. Essentially, they have put up a big "for sale" sign. With a 76% average working interest in 459,000 gross acres of land, this will garner a lot of attention. Particularly considering that within that land package, there are large blocks of "hot" unconventional plays like the Montney and Duvernay, which companies like Encana (NYSE:ECA), and Athabasca Oil Sands (OTCPK:ATHOF) are active in.
This sale process approach increases the probability of an outright sale of Sonde's Canadian assets or of a joint venture with a larger oil and gas company or foreign national oil company, which look for scale that an individual asset of Sonde's might not have, but that Sonde certainly has across its developed and exploration-oriented portfolio.
Pioneer (NYSE:PXD) recently announced a JV of its Wolfcamp acreage in the Permian basin, at a valuation of ~$20,000 per acre. Sonde would get nothing close to that, but the size of acreage in the JV was ~80,000 acres. Also, the IRR from wells Pioneer had been showing in the Wolfcamp were in the ~30% range, which could be achievable across some of Sonde's unconventional acreage. Again, the $20,000 per acre number is too high to use for Sonde, but it does tell investors that foreign companies are still looking to do JVs, and that valuations have not come down for unconventional oil resources.
One other interesting thing point of information from the sales materials - it appears Sonde's Duvernay acreage was acquired with the Bakken model in mind. In particular, they acquired acreage where they saw evidence of "sandwiching", where an upper and lower oil-saturated shale have a thin, porous potential reservoir in between. Those familiar with the early development of Parshall and Sanish fields will recall that this was one of the driving factors of the Bakken horizontal drilling success, which drove tremendous oil production growth for EOG (NYSE:EOG), which essentially discovered and developed Parshall field, and Whiting (NYSE:WLL), which essentially discovered and developed Sanish field.
As always, do your own research, and keep in mind that Sonde is a small company with a relatively illiquid stock. It is subject to various risks particular to small companies. Caveat emptor.
Disclosure: I am long SOQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.