At current levels buying AZZ is a no brainer imo. The sale of SS puts real value of cash and shares of transaction at circa 50c plus the $10m p/a annuity . Plus you effectively get a call option over the oil price via your Breitburn position which after a 20% fall in WTI one would think is destined for higher prices. If your not bullish on oil why would you be in this stock anyway.So it would seem to me that the value of this deal is not static and in fact will increase over time if not from the Breitburn shareprice , the $10m p/a dividend will keep giving.
The company has previously bought back over 40m shares at around 41c so judging from past actions you could reasonably expect that if they can buy back stock below the value of the SS deal which values NS and BS at zero, I reckon they will be pretty active in the market at current price putting floor in stock. How humiliating it would be for Lone Star to exit their position into the Buy back at 41c after building position at 45-50c. Not a great business model to promote to your potential investors in Lone Star Value Fund.
As usual we here from the same detractors who must suffer from some debilitating problem that sees them invested in a stock that they apparently cant stand being in....strange.
Take a look at Lone Stars previous golden haired child Callon Petrolleum that they were quick to highlight their influence in the success of the company and its shareprice.They have tanked from$12 to $6, as have the majority of small to midcap shale plays in the US. Redfork Energy on our market is a good example of what can go wrong in the shale business when you use too much debt to fund your operations and things don't work out...$1 to 2c.
Don't get me wrong, I would have loved to have copped a bid of 85cps or more, but perhaps that is yet to come. In the meantime they have reduced the risk of this company considerably and put themselves in a strong negotiating position to extract the best deal from their remaining 25000 acres.
AZZ Price at posting:
42.0¢ Sentiment: Buy Disclosure: Held
