Today, I sold 12,500 shares of Terra Energy (TSX:TT) at $0.31.
In at $0.27, out at $0.31, profit=?+13.50%?after commissions.
Terra?s news release today simply confirmed the last disposition announcement. The company will be closing on $22M in dispositions on December 14 leaving the buyer with the OPTION to buy the remaining acreage for $56M.
I initially bought on the premise that by mid-December, the sale would be closed for roughly $80M in dispositions. It?doesnt?look like it and that means no 2013 guidance until AFTER Mid-March 2013. That also means another extension to their lending facility to?accommodate?their asset sale process.
Sure the company remains undervalued but so does everyone else. Management partly accounts for the poor share price and the debt to cash flow is still high at or above 6.0x UNTIL they close on the remaining asset sale (using $64M in debt).
Like I said before, their profit per barrel is really not thrilling at ~$5/boe. It is one of the lowest in the industry and that?s based on $3.30/mcf AECO gas according to my calculations. I would have liked to hold until $0.35 which is what I valued it at based on 3.5x CFPS but not at this level of debt.
In my opinion, there will be plenty of time to get back in as the market will sooner or later realize that the news did not announce a new disposition. It?s the same one except it will close in 2 parts and over a 4 months period.
I believe I am right in my assessment because if I wasnt, smart money would have taken the stock above $0.50 easily.
What do you think of Terra?