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SSN Announces Subscription Rate, Still Awaiting Acreage Sale Finalization

|Includes: AOIX, KOG, Samson Oil & Gas Limited (SSN)

This article was originally posted to our site at zmansenergybrain.com last Friday.

SSN Announces 75% Allotment:

  • Shareholders receive 75% of their subscriptions. Expect to see shares and refund checks for the 25% in accounts next week.
  • After the deal, SSN should have 82.7 mm ADS outstanding following the deal giving them a market cap of $71 mm.
  • Proceeds of the deal are $6.2 mm to their cash reserves for this deal.
  • Use of proceeds will be to tide them over on their programs and cash needs until the asset sale in the Niobrara closes in late July.
  • I would not be surprised to see some very volatile swings in the shares, now that people know what they have in their possession. The acreage sale after all is not yet a done deal and between now and then, I'm sure many holders will take the easily flip, myself possibly included.
  • My valuation thoughts in a table:

 

This was posted to our site Monday.

  • Post offering share count confirmed, same as my model last week
  • Niobrara portion of presentation shows the acreage sold so they are assuming the deal gets done
  • In fact, they are assuming the deal gets done at the high end of the range of possibilities, $US 76 mm (pre tax).  Note that current market cap is $US 70.2 mm.
  • Planning to drill two 5,000 foot horizontal Niobrara tests on their remaining acreage (they are expecting 500 bopd IPs, one would assume based on results they have heard about from EOG just to the south).
  • They see 26.8 mm BOE recoverable reserves on their remaining Niobrara acreage … to early for me to gauge the reasonableness of the assumption but the math to get there would not be overly aggressive if this were good Bakken country.
  • My sense is that the stock will move on positive Niobrara news from the EOG 2Q call, should there be any (EOG has been going slow as usual with the data from this play although not with the permitting and drilling).
  • If we transition from thinking in terms of acreage valuation to EUR valuation and they are close to correct on the reserve forecasts the stock will leg higher from here, perhaps adding another $1.25 to my $1.31 to $1.61 price target range (so call the new really case target $2.50). That should take us into next year's drilling to accomplish.   
  • SSN is also planning to sell Rockies gas assets of about 11 Bcfe which could fetch $15+ mm.
  • Lastly, I find it interesting that in the back of their new presentation they compare themselves to KOG and AEZ.
We continue to own shares of SSN and continue to await our 75% distribution in the rights offering, which, as of today's $1.01, affords an immediate flip gain of 74%.



Disclosure: I am long SSN, AEZ, and KOG