Rig workers in Alberta.Kevin Van Paassen
New Star Energy Ltd., a Calgary-based junior oil company, has put itself up for sale and may be an attractive take-out candidate for a dividend-paying energy producer looking for some growth.
The privately-held company hired Macquarie Tristone to run the sale process, with bids due in September, according to an announcement on the Macquarie Tristone web site.
The company has a market capitalization of more than $300-million, making it a nicely sized tuck-in purchase for somebody. New Star is forecasting production of as much as 5,000 barrels a day in the second half of this year from its land holdings not far from Edmonton. The company utilizes so-called enhanced recovery methods and horizontal drilling to increase the amount of oil it can suck from underground reservoirs.
In the grey market for privately traded companies, the company's shares are offered at $2.25 apiece, according to grey market specialist Liquidity Source. Earlier this year, the stock was trading in the grey market at closer to $1.90. It raised equity in 2012 at $1.50 a share.
In a report earlier this year, GMP Securities and said the company's clean balance sheet would make it an "attractive acquisition candidate." The company's growth is self-funding, meaning it generates enough cash to keep paying for new drilling. It could also start paying a dividend on its own, GMP said. Or, that profile would make the company attractive to a dividend yield-focused producer looking to expand, GMP said.
New Star got its start when a bigger company was selling off a property, and a bunch of investors stepped forward with $128-million to create the company and buy the asset. (This 2012 article from the Calgary Herald has more details.)