Gordo
If Members go back in the question forum many years, they'll find we never put CPG as our favourite because of its massive acquisition sprees, which always resulted in CPG issuing new shares on a semi-regular basis. That doesn't automatically make the Hammerhead deal 'bad', but we would not like to see CPG go on a buying spree again. CPG will assume $455M in new debt, and spend $1.5B in cash for the company, with the balance in shares. CPG is issuing $500M in new stock at $10.30, a 64c discount to the market. The deal is accretive in 2024, enhancing cash flow by 15%. The dividend will rise 15% on closing. Production moves to 200,000 to 208,000 b/d in 2024. It adds significant drilling locations and consolidates several areas. Leverage (CPG's number) goes to 1.1X. CPG will become the 7th largest exploration and producing company in Canada. It is a big bet by CPG. It is a $2.6B deal for a $5.7B company. CPG already spent $1.7B earlier this year to buy Spartan assets. HHRS has been listed less than a year, but the price has doubled since July. CPG management obviously expects this deal to work, and we do not have a reason to doubt that. But it is a big move, and requires both interest rates and commodity prices to move in the right direction for it to really work. We would see it as an aggressive, but not necessarily bad, move. Expect much volatility in CPG shares for some time now, however. We would not necessarily buy the bought deal. We think with arbitrage moving the shares of the two companies around, CPG investors will have more time to buy, if interested.