Read a few articles in this weekends (13th/14th Dec) Wall Street...

Read a few articles in this weekends (13th/14th Dec) Wall Street Journal, the discussion of the recent fall in crude oil prices is rife amongst US newspapers and business journals , for one, due to the fact that the US is now producing such a huge amount of oil. One article talks about how oil producers were asking for tax breaks on 2006 as the oil price was so high, now with the price around $60 a barrel they re wanting tax breaks as the price is so low!

The article interesting to TEX holders discusses the effect the price has had on merger and acquisition activity which specific reference to Repsol looking at buying out Canadian explorer Talisman Energy for $6-$8, currently trading around $4 a share. Talisman says they have been approached by a number of parties. The article goes on to say that historically when the oil price drops (plunges!) large cashed up producers go on the hunt for small companies with good ground where they can buy extra production cheaply… TEX?

So whilst the drop in price is not good we may see a takeover rather then a sale as M & A activity steps up. Also mentioned is the fact that whilst M&A activity increases the junior and small companies have little bargaining power due to the oil price and most small companies involved in exploration or in early days of production struggle to make a profit, particularly with the low oil price. So doubtful we will see an acreage figure near the $40k mark as is touted as the average in the Permian Basin.

Still worth hanging on for the sale or takeover though, I think. That being said you can't really sell anyway, no buy depth!

Bar Coaster Scribbling’s:

For a sale based on price per acre…

TEX with 2,800 net acres and current valuation of around $8k per acre and $9 million in convertible notes. MC of around $20 million at 4 cents per share. Cash as reported at the AGM of 2.7 million I think we can leave out as it will be spent by operations and admin.

A sale at close to half the average price, around $15-20k per acre results in $42-56 million.
The average of around $40k per acre from the annual report mentions in the small print about some of that value being from control so with TEX’s scattered land and current oil price I don’t think we can look for the average.

Take the bottom end of the estimate at $42 million, minus debt of the notes and cost of the sale, say $10 million ( anyone have an idea on sale costs, a percentage perhaps?).
Leaves $30 million, $20 to go shopping for a new asset and return $10 to the holders (2 cents per share cash plus you hold shares in a shell with no debt, $20 million cash or 4 cents per share cash.

As mentioned by TEX they hope to have the sale process finished by March 2015 so we hope for a quick process.

Best of luck TTB.