Investment Q&A

Q: This proposed sale of approx. 2/3 of Gear's (GXE) current oil production for only $110 million is a terrible offer for GXE (very nice for the buyer Cenevous (CVE) especially if they get the benefit of most of Gear's tax pools). GXE is virtually debt free and can afford to pay the existing dividend (currently yielding in excess of 11 per cent) so why is this new management team offering us such an awful deal? If this is the best deal they can make then they should just leave the company as it is. With no debt by early next year Gear could start to buy back shares and when those shares are yielding better than 10 per cent the reverse compounding effect is enormous. It would only cost about 13 million in free cash flow in 2025 to buy back 10 per cent of the float and with 10 per cent of the float gone the .5 cent per month dividend gets easier to easier to pay, right? The naysayers will say that if oil goes down a lot that the dividend is not sustainable, well I say, if you think oil is going to go down a lot then you should NOT buy any oil stocks, or better yet you should be brave and short the oil stocks. So watch your mail box and when you get the circular in the mail vote NO. My understanding is that if you don't vote then your shares are considered to be a vote in favor, right?

Q: Just a bit of math Gear is trading at .48 cents possibly due to Tax loss....does it make sense to buy it and hold it for a few months and receive .60 cents ????
that would be a 25% gain
I appreciate your advice,
Many thanks

Q: ..a poorly worded new release, convenient mail strike and a share price that keeps dropping. Would you hold GXE or dump it and never invest with that mgmt again?

Q: I have another question about the proposed deal to buy part of Gear and spin out the rest into a new company. Dave in his question on december 5th made it sound that us existing share holder will get 61 cents per share and 1 for 3 shares in the new company. The way I read the press release on the Gear website it is 61 cents or 1 for 3 shares in the new company. I hope Dave is right because then the current value of Gear shares is much greater. How do you read it? Is it and or or? Also what happens if the mail strike is prolonged and we don't get this circular in the mail. My email is full of so much junk that I could easily miss an email from Gear Energy and not vote. I think I am not the only one who would miss it. Also I know how to go to sedar's clunky website and look for stuff but everyone might not know/or want to do that. It seems a little fishy/stinky that this is being presented during a mail strike and they want to finalize this quickly (Jan or Feb). If Cenovous is the buyer then they will be able to take advantage of all the tax pools that Gear accumulated from their years of losses. If so they can pay more than $110 million for 3500ish BOE of production. Heck that is only a little over $30,000 per flowing barrel plus the benefit of using the tax pools. I understand why the purchaser wants this to go through quickly!!!!

Q: I unfortunately own GXE and learned from this site that around 2/3 of the company will be disposed of in early 2025. The paper napkin math indicates that the current market price should be around 90 cents per share (offer of 61 cents for 2/3 of the company plus around 30 cents for the 1/3 that will be transferred to Newco).
How is the current price only 54 cents and dropping? Even the cash offer of 61 cents is notably higher while Newco is valued at zero. What am I missing?

Q: I think you are going to get a few questions about the offer to buy out Gear Energy (GXE) for the heavy oil assets and leave the remaining assets in the new company called Newco (stupid name IMO). Does the deal seem fair to you? I realize you are not oil experts (since you can't be experts on everything) but I can't figure out if the assets in the Newco are any good. If the Newco assets and good and there will be a $110 million to work with maybe the deal is not that bad. Also, my understanding is the GXE has a lot of accrued losses so who would get the use of those losses? I assume the purchasing company who is getting the gear name would get those losses? If that company is paying taxes then those losses could be very valuable. So valuable that the the purchase price of $110 million is larger paid for from saving on income taxes, right? On the other side I understand that GXE has a lot of asset retirement obligations. Who will be liable for those obligations, Newco or the purchaser? I think these are valid questions that us light share holders should be asking!

Q: Can you help me understand todays GEAR- transaction, and as a sharehold, what we get out of the deal. Is there a chance of a better offer coming, or is our choice that 66% vote for the deal, or we stay as the previous company GEAR

Q: I have only ENB in energy stocks and am looking to add a basket of stocks with at least a 5% dividend, but also looking for capital appreciation. With the dividend, I don't mind waiting for the appreciation. Do you see any red flags with any of these, and how would you make up a 5% position? Would you sub any other energy stock with a 5%+ dividend?

Q: I’m down on GXE in my TFSA and am thinking to add a bit more. It looks like they had a good quarter recently and there’s been lots of insider buying. What’s the outlook like for growth and the security of the dividend? Is there anything else to note other than being a small company in an out of favor sector?

Q: Do you have any insights into GXE? It's oddly holding at .64 despite Oil rising and other companies moving higher. Beyond the dividend cut and strategic review flop, is there anything else you can add about their prospects? Thanks.

Q: G'morning 5i,

I'm sitting on a fairly substantial loss on GXE in my TFSA. In trying to decide what to do, I first waited for the strategic review to complete, hoping that something positive would come of that. When it didn't, I next decided to wait for its latest earnings report, hoping for something positive there but, from my review of the numbers and despite management's rosy outlook, I don't see anything re-assuring there. either.
My inclination is to sell, take the loss and do something useful with the now severely diminished funds.
Occasionally in the past when I've made that decision with a losing investment, hindsight has caused me to regret it, and I think perhaps I should have been alert to signs that a turnaround was in the offing.
From your objective perch do you see any reason to hold GXE given the milquetoast strategic review and what I interpret to be the less than satisfactory recent earnings report?
I look forward to your thoughts. Thank you.
Peter

Q: Morning 5i,
I woke up to an unpleasant news release this morning, that being GXE announcing that its strategic review has come to an end with nothing - absolutely nothing - to show for it.
I've been holding a substantial number of GXE shares at a considerable loss, waiting for the review to conclude in the hope there would be news that would put me in a better position. However, just like the CTS strategic review debacle, it seems to have led nowhere., and quite possibly just further reduced shareholder value.
It appears that none of the producers out there with bags of cash think the GXE assets are worth adding to their stables, so how can they be worth much?
Is there any light in this tunnel and I just can't see it, or is GXE destined to languish at its current very low share price for a long time to come, (especially given the apparent likelihood that even $90 oil, if we ever see it again, is a long way off)?
Dump it and move on, or hold to see if there's any upside that the market identifies out of this colossal waste of time that I'm presently unable to discern?
Thanks 5i.
Peter

Q: I gambled on these 4 energy stocks last year and other than Pine Cliff Energy I'm down around about 1/3. I'm thinking of averaging down. What would you do if you owned these 4?

Q: Hi folks. I am very happy overall with how my portfolio is doing, due in large part to 5i. Thank you. However I do have one dog, which keeps hitting new lows. The good news is that it pays a nice dividend, and I only have a 1/3 postition. But I am tired of watching it sink... now down 47%. What are your thoughts... should I cut it loose? Unfortunately it's in my RRIF. David

Q: I want to add one or all to my TFSA from my registered account- In what order ( if any ) would YOU transfer them ? - Thanx Robbie

Q: This holding has been a disappointment for me. I bought it when oil prices (west texas) were in the seventy dollar range and it dropped even as oil prices spiked into the eighties. Would you dump and move on? It's in a TFSA account.

Q: Hi Guys,

I'm looking at a couple of smaller oil and gas companies and wanted to get your thoughts. i3 Energy and Gear Energy. Both of them got into a little trouble this year when they implemented a unstainable dividend. Their dividends have been dropped to a sustainable level, but both of their share prices took a pretty good hit for that. However it looks like they have good cash flow, both are paying down debt, and they seem to have pretty good land packages. I was thinking with all the cash floating around the oil patch right now, both would be pretty good takeout targets. Curious on your thoughts and if they would be a good hold.

Thanks,

Q: Hi, I own Parex, Gear, Trican, Pason, Advantage and Prairiesky in small percentages for this sector . Collectively, I am about breakeven. I would like to consolidate into two or three holdings. Of these, what would be your preference? Overall total return is the objective.
I have also seen Terravest mentioned as a favourite compounder in the same sector in the Q&A, Is this a new entity or did they do a recent name change from a former company. Is this a more preferred name vs the others mentioned?

Cheers,
Steve

Q: Hi 5i,
In response to a question of mine and questions from others over the past few months you have pretty uniformly rated GXE a hold - partially I think on the premise that the damage has been done. I am holding and I'm content to continue for a while.
I wonder though - given its small size and present earnings of - $52M - is there enough money there to justify it continuing as a public company, especially one that is shoveling money out the door every month in the form of dividend payments?
In the past year (and possibly for longer)Twin Peaks Capital LLC has been buying up GXE shares pretty regularly, and today it owns 2.51% of the company (6.5 million shares worth $5.7 million at todays prices). Insiders have also been buying.
Why would a business like Twin Peaks Capital LLC buy so heavily into a little public company like GXE - how does it expect to get a return on its investment? Capital appreciation seems unlikely. Is it just cashing dividends, or might it be getting ready to take it over itself or, alternatively, might it be trying to ensure it has a large and therefore profitable position when someone else takes out GXE?
Thanks 5i - I look forward to a better understanding of what might be going on.
Peter

Q: How would you rank these? What is their free cash flow if any? Please advise whether they are buy, hold or sell rating..