Unfortunately, the easiest thing about my spreadsheet is that I rarely have to change the stock price of ARN.
You raise an interesting question. In many respects, because it includes both debt and equity, EV is a self modulating metric. Up to a certain point, debt can grow the value of a business, but beyond that point, growing debt can devalue the equity. That appears to be what has happened to ARN. They have passed some tipping point where their debt has caused the current market to devalue their equity.
SCS is in the same category.
Let's play some mind games for a moment before we enjoy the weekend and return on Monday to the reality of Arcan's cellar-dweller stock price.
I ran some quick numbers this afternoon out of curiosity. Given their adjacency to CPG in Swan Hills (they are also adjacent to some other big players like Penn West, Devon and Pengrowth):
At $1.49 a share
Arcan's production (5,750 boepd) is currently valued at 43% of the value of Crescent Points production.
Arcan's 1P is at 44% of CPG;
2P @ 36% of CPG;
Adjusted 2P @ 34% of CPG.
At $4.00 a share:
ARN Production is valued at 71% of CPG
1P is valued @ 72% of CPG
2P is valued @ 58% of CPG
2P (adj) is @ 55% of CPG
An acquisition by CPG still looks quite accretive to CPG at $4.00.
At $4.25 a share, based upon my "MISS" number of 5,750 boepd, ARN's value equals my company transaction average of $128,000 per flowing barrel. $4.25 = $33.14 per 1P barrel of reserves and is above my transaction average of roughly $28 per 1P. But $9 per barrel below my average of $26 per adjusted 2P. Heck, Peyto just paid $25.91 for Open Range (the most recent market comp) and ONR is a natural gas company not a light oil company. One would think that a 97% light oil company could be worth at least the equivalent adjusted reserves value of a natural gas company, but call me a dreamer.
If it were, ARN would be worth around $7 per share.
Arcan's production and reserve values stop being accretive to CPG around $6.60 an arcan share. By "accretive" I mean at a discount to CPG's current production and reserves valuations.
I don't have numbers on Pengrowth and Devon. PennWest isn't as profitable as CPG, isn't as oily as CPG, and Arcan isn't accretive to PWT on a flowing barrel basis under any scenario above $1.25 per share. ARN's value represents a discount to PWT's value on a reserves basis up until around $2.50-$2.75 per ARN share. Beyond that value, ARN's reserves represent a premium to the way the market values PWTs reserves. And notwithstanding the fact that "deals get done at market" it doesn't appear that PWTs stock price fetches a premium in the market today. If they made a play for ARN, it would be at a premium to the current market value of their reserves. They would have to be willing to "pay up" to aggregate reserves that are apparently more valuable than how the market values their own reserves. They would be paying a premium for those reserves.
I hope this makes a little sense. I never buy stocks based upon potential takeover rumors and I don't think a takeover is imminent, it's just interesting to compare ARN's current value relative to some of the bigger fish on the Swan Hills reef and posit whether or not they could pay a premium for ARN and have it represent a premium or discount to their own valuations today.
Disclaimer: I own stock in ARN and hope it goes up someday.