I've been thinking about this. Both TNZ and VLE are asymmetric bets - and a notable diversification opportunity for some.
The TNZ acquisition cost $246m and is effective Jan 1 2024 and expects to be closed July 1 2025. Very high odds there will not be a problem getting regulatory OKs (although it's not a deal until it's concluded).
NAM expects to produce $134 million in free cash flow in 2024 alone, to slam against the purchase price. There'l be less FCF for a few years with the seller getting the following from the sold asset "NAM" 2025 – 50% of FCF; 2026 – 50 % of FCF; 2027 – 25% subject to a maximum of 120 million Euro, no minimum. There's more contingent sharing of a royalty from NEW discovery fields if production hits thresholds but man, what a mother load of opportunities and assets acquired. Decades worth.
VLE was severely hit when Wassana production was suspended due to what may or may not be a superficial crack in a structural support of the MOPU at the site. I think it's really overdone. Compare the two company's charts! Odds are based on the last NR that its a superficial crack and not serious - greater than 50%, lets say.
If on August 8 they announce it's no big deal, you win (closed $4.21). If it is a more serious problem I'd argue it's mostly priced in and at least the uncertainty is gone. The chances of a permanent problem is next to nil.
VLE is a cash cow and after short term acquisitions in the 5,000 to 10,000 BOD (currently 15,000 net of the 5,000 Wassana offline). A reliable source called IR last week and they think they will be 100,000 by the end of 2026. At $4.21 you aren't speculating on that kind of crazy target. Betting on great management to do it again, but just the 5,000 and 10,000. I can't comprehend the 100k, don't want to.
NCIB - if we get it you win. If you don't get it, you may win bigger. DYODD! |
