Tappit put up for sale
Bruce Johnstone
Leader-Post
Thursday, January 16, 2003
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Frustrated by a chronically undervalued share price, Tappit Resources is putting itself on the auction block to "maximize shareholder value,'' the Regina-based junior oil and gas company announced Wednesday.
But Tappit's president and one of its earliest shareholders concedes that the exercise will likely result in the sale of the company to a larger company or income trust.
"We probably won't survive as a junior oil and gas company,'' said Lawrence Bintner, president of Tappit since 1992 and a shareholder since 1985.
Bintner said Tappit found its increasingly difficult to hire technical staff, like geologists, as the company grew from a few hundred of barrels of oil of production per day to 2,500 barrels of oil equivalent per day (BOED) at present.
"We're looking at exiting the (first) quarter at 3,000 BOED,'' Bintner said.
Bintner said Tappit, which he said has "9.5 employees,'' has comparable production to Calgary-based companies with 20 to 25 employees. With a capital budget of $25 million to $30 million a year, Tappit was getting too big to manage, he said.
"We felt we've taken it as far as we can,'' Bintner said.
In addition, the board of directors believed Tappit's production and reserves were worth more than what the market was valuing the company's shares.
Tappit closed Wednesday at $2.05, up 22 cents, close to its 52-week high of $2.25 and up from its 52-week low of 45 cents.
"We're still trading below our peer group,'' Bintner said, referring to junior companies with 1,000 to 3,000 BOED of production.
While Bintner tried everything from share buy-backs to traveling the "dog-and-pony show'' circuit to promote Tappit, he said the shares just wouldn't rise to their fair market value.
Part of the problem is being headquartered outside of the capital of Canada's oilpatch, Bintner said. "We were lost in Regina,'' he said. "Calgary is the centre of the universe.''
So, the directors decided if you can't beat 'em, join 'em.
Tappit has engaged the Calgary-based firm of Waterous & Co. to "act as exclusive adviser and agent and assist the company in identifying and evaluating strategic alternatives,'' the company said in a press release.
With high oil and natural gas prices, the market for oil and gas assets is excellent right now, Bintner said. "It's a seller's market.''
He said Tappit shareholders, including himself, believed it was the best time to sell the company. "The shareholders are from all across Canada. They expect to see profits.''
While Bintner intends to remain in the city, he has no plans beyond managing the company for the next two to 21/2 months until a buyer is found. "I'm not going anywhere.''
He admitted to feeling ambivalent about selling the company he worked for and helped build for the last 10 or 12 years.
"It's been a great time, building the company. But, in the end, it's business.''
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