AvenEx Energy Corp getting rolled up

Jan 11th, 2013 – 2 Comments

The MACD and RSI are indicating that a move higher is setting up.


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Hi,

I read your last post and I’m wondering, if you don’t mind, what your take is now on AvenEx?

Steven

 

Hey Steven,

Thanks for the assignment. The last investigation of the case for AvenEx Energy Corp (AVF TSX) was conducted on January 13, 2012 when it was trading for $5.43 and offered a yield of 9.9%. Jim wanted some input as to the prospects for the stock and it was noted that the RSI was moving lower and that the MACD was not suggesting a buy. Research conducted at the time revealed that the company had cut their payout in 2011 from $0.06/share to $0.045/ a share in 2011 and that at best the stock was in a consolidation mode. Unfortunately the distributions were cut again in 2012 sending the shares into a tailspin.

On December 20, 2012 AVF announced a merger with Pace Oil & Gas (PCE TSX) and Charger Energy Corp (CHX TSXV) to form Spyglass Resources Corp. The exchange value of shares implied that  AVF was worth $3.32 but as soon as the deal was announced the shares sold off.

A run of the charts will provide further evidence to help you decide how to proceed before the shares of AVF are exchanged on a one for one basis with shares of Spyglass.

 

 

The three-year chart illustrates the severe decline that started in late March of 2012 and the death cross that formed in April. The lesson we can harvest from this tale of woe is that your first loss is usually your best loss. The shares hit a 52-week low of $2.56 on August 17 providing many trading days to preserve capital and look for another opportunity with AVF or prospect for a new target.

 

 

 

 

 

The six-month chart provides a good indication of market sentiment about the proposed merger. The selling that followed the announcement suggests that investors have capitulated and have moved on. The deal has to be approved by shareholders in all three companies so there is still some grinding before things settle up. The expectation is for the deal to close by mid February.

Spyglass will produce 18,000 barrels of oil equivalent per day and pay a dividend of $0.03 per month.  If you like the prospects for the company and the management team it might be worth a punt. The MACD and RSI are indicating that a move higher is setting up.

 

Make it a profitable day and happy capitalism!

Categories: Energy
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