market disconnect paradox, page-12

Auto,

I see your good “both equally undervalued logic”, but a couple of points:

1/ Intangibles - Mgmt Competency

Just consider
- Which one actually operates and fully controls their activities
- Compare the relative drill bit and development achievements of COE mgmt v’s IPM mgmt, thus the likely “reasonably likely” future results.
- Which company is still on probation re above
- Who had the foresight to purchase an old rig and completely refurbish it so suitable for horizontal drilling at huge cost savings
- Which company contains the greater technical expertise and is more innovative
- Which company has the greater potential for drilling failure to eat away equity
- Which company looks after it’s shareholders re dividend returns and low holding costs

2/ In my experience, even in a boom market, after a script offer there is always an structural excess of sellers in the takeover company - for a time. It always happens presumably because they have less loyalty and are slightly more inclined to sell than existing holders. In a bear market, this excess and the fear of it, can have a dramatic effect on the share price of the takeover company. Prima facie, script offers in a bear are unwise.

In early July Rudi on Fnarena did a piece titled “Lest we Forget” – bear market trading rules. Excellent read and was freely available. Well worth tracking down.

Feel sorry for big COE holders as know how heavily invested some are. Hoping this thing will work out ok for everyone in the end.

PE