Kicking Horse Energy (KCK:TSXV) announced Tuesday that it has entered into an agreement to be acquired by ORLEN Upstream Canada for approximately C$356 million.
This buyout story began in 2011, when Kicking Horse diversified its previous focus on the East Coast, by acquiring a position in a Montney Formation project at Kakwa in the deep basin of Alberta.
Its share price performance and now this buyout are a direct result of the company’s willingness to diversify; and, proves that taking a risk, especially in the small-cap market, can pay off in spades.
Kicking Horse adds to commodity resurgence
Many commodities, including oil, have been trending higher for over a week. An increase in M&A activity such as this Kicking Horse deal, will only increase speculation that a more favorable market for commodities may be returning.
This is one of the largest transactions (C$356 million) on the TSX Venture in 2015 and, for a change, is not being done at a huge discount to recent highs.
Despite Kicking Horse’s 52-week high of $5.86 per share and, the fact it traded over $7 in late 2014, a C$4.75 per share all cash deal still locks in huge profits for long-term shareholders who rode the energy stock higher in 2012 and 2013.
Kicking Horse traded for less than $2 per share in early 2012 and went on an epic run in 2013 and 2014. Now, with oil and natural gas prices depressed the company is locking in profits for its long-term shareholders.
The offer represents a 47% premium to the most recent closing price of Kicking Horse’s common shares and a 60% premium to the 20 day volume weighted average trading price of Kicking Horse’s common shares.
Kicking Horse – 5 Year Chart
In what Jim Cramer has recently called the biggest week since 2008 for commodities (referring to last week), deals like this bring back memories of the 2000s – when they were the norm.
Oil sold off Monday, but was moving higher Tuesday up nearly a dollar to $48.05 per barrel.
Cramer cautioned investors that the bull might not be back for commodities just yet and referenced the mindset towards China during the mid-2000s, commenting:
“Almost every executive in these industries bought into the notion that China would grow into the skies.”
source: http://www.cnbc.com/2015/10/09/cramer-will-the-commodity-rally-run-out-o…
As we know now, growth in China failed to live up to expectations along with global demand for many commodities.
Kicking Horse acquired by ORLEN Upstream Canada
Who is ORLEN Upstream Canada?
It’s important to know ORLEN Upstream Canada to get an idea of the type of companies willing to do deals in this market. The company is a wholly owned subsidiary of PKN ORLEN S.A., the company acquiring Kicking Horse and has some history in Alberta.
The Company’s headquarters are located in Warsaw. ORLEN Upstream is exploring and prospecting for hydrocarbon deposits. It explores for crude oil and natural gas, as well as providing services related to exploration and production of crude oil and natural gas.
This deal represents a European country securing a reservoir of condensates, through its wholly owned subsidiary, in a politically safe jurisdiction: Canada.
Don’t underestimate the power of reputation for a second in the resource investing game.
In a 2015 report from the Reputation Institute Canada was ranked as the most reputable country in the world, based on a variety of environmental, political, and economic factors. For countries located in Europe, on the brink of war or located near live war zones, Canada remains an appealing place to invest.
We wrote about the performance of Canadian oil stocks this past weekend in our Volume titled Big Week For Canadian Oil Stocks.
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Global connection to Kicking Horse
ORLEN Upstream International B.V. is a subsidiary of ORLEN Upstream and in November 2013 the ORLEN Group became the holder of a 100% interest in TriOil, a Canadian company.
TriOil operates predominately in the province of Alberta, Western Canada. A major part of TriOil’s operations is conducted in licence areas spanning approximately 3,500 square kilometres, including 1,100 square kilometres of geological formations with confirmed hydrocarbon accumulations.
Kicking Horse Energy has been primarily focused on the development of Alberta’s liquids-rich Montney Formation tight gas play since 2011. So, to summarize, Kicking Horse is being acquired by a European outfit that waded into one of Canada’s major shale gas and shale oil resources: the Montney Formation (through its wholly owned subsidiary).
We have written about the montney time and again at Pinnacle and explained its vast potential in a September 2014 Volume titled Betting on Nat Gas in BC.
Today is a day of celebration not only for Kicking Horse shareholders, but holders of other well positioned juniors in not only the montney formation, but other resource plays in Canada.
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