Below is my pitch for Petrobank Energy (PBEGF.PK). It's mostly an update of TMFDeej's pitch from October. I'd recommend digging into the filings carefully before considering Petrobank for investment - I'd only consider the info below as a starting point for one's own research on the company.
Petrobank Energy (Pink Sheets: PBEGF.PK)
Today's drop in share price seems to be from the new reorganization, in which Petrobank shareholders will receive shares of New Petrominerales that represent their proportional interest in Petrominerales. Since Petrobank shareholders will receive the new shares, the shares of Petrobank Energy have fallen by the perceived value of the Petrominerales shares since Petrobank shareholders are now receiving separate shares of Petrominerales instead of owning it through Petrobank's shares.
To put this all in perspective, I'm going to refer to TMFDeej's pitch (http://caps.fool.com/Pitch/PBEGF.PK/5261203/the-margin-of-safety-in-petrob.aspx), in which he described the parts of Petrobank Energy. Keep in mind this was posted in October, so some of the parts may have changed (I have not made adjustments):
1. 110M shares of Petrobakken valued at $2.5B market cap
2. 65M shares of Petrominerales valued at $1.6B market cap
3. 670 million BOE residing in its parent company
4. Ownership of a potentially game changing oil sands extraction technology that could be worth billions
The market cap of Petrobank at the time was $4.2B.
Going by that information, the Petrobank shares are losing the $1.6B interest in Petrominerales shares and shareholders will instead receive separate shares in New Petrominerales. $1.6B/$4.2B is 38.1%. Today's correction (currently at over 45%) seems to be an overreaction.
I believe this new reorganization adds further value to Petrobank. Assuming Petrobank still owns 58% of Petrobakken (PBN.TO), the value of those shares has a market cap today of $2.38B. Assuming 106M shares are still outstanding for Petrobank, the market cap is $2.49B. For $0.11B, Petrobank shareholders get its interests in the 670 million BOE from the parent company and whatever interests it owns in the potentially game-changing oil sands extraction technology.
The original thesis was that the sum of parts was much greater than the market cap at the time. Today, Petrobank rid itself of the Petrominerales shares (worth $1.6B in October) and took a $2.1B hit in market cap (45.8% drop as of 11 AM on 12/29/10). It seems the market overreacted by $500M to the news of the new reorganization. Not only that, the potential undervaluation of the sum of parts has now been magnified.