Lone Pine shares worthless under deal

source Calgary Herald (http://www.calgaryherald.com/business/Update+Lone+Pine+shares+worthless+under+deal/8958980/story.html)

CALGARY — Long-suffering shareholders of debt-laden junior gas producer Lone Pine Resources Inc. will be left with nothing under a deal struck with its noteholders to trade debt for stock.

The agreement announced Wednesday, which requires court approval, would result in shareholders having their stock cancelled without compensation while holders of the Calgary company’s debt instruments will wind up in full control.

“For the corporation, this could be viewed as quite positive, anytime you eliminate close to $300 million of aggregate debt,” said Tim Granger, president and chief executive of Lone Pine, in an interview.

“The noteholders are converting $195 million of their notes to equity and then backstopping a $100-million equity infusion. The struggle for the company was its lack of liquidity because of its debt burden and this eliminates that.”

Lone Pine was valued at $13 per share in an initial public offering in May 2011 when it was spun out from Denver-based Forest Oil Corp.

When the final distribution of 70 million shares was made to Forest shareholders on Sept. 30, 2011, the stock closed at $6.95, giving the company a market capitalization of about $600 million for its 85 million shares.

It has lately been fetching around four cents per share in thin trading. Its 52-week high was $1.78 set last October.

Granger said Wednesday’s deal, made with three large holders of about 75 per cent of its notes after the company missed $10-million interest payments in August and September, is good for employees, who will keep their jobs.

He agreed it’s not good for shareholders.

“That’s the unfortunate aspect out of this transaction,” he said. “The company needed to raise a significant amount of money — since last May when I came here, I’ve been back and forth to Toronto to raise capital — and capital is not being offered.”

Lone Pine was delisted from the New York Stock Exchange last week for failing to meet minimum market capitalization of $75 million and a minimum closing price of $1 US.

TMX Group, owner of the Toronto Stock Exchange, had started a 30-day review of the company’s listing privileges on Sept. 17 but it announced Wednesday it would go to an expedited review and suspend the shares immediately.

Lone Pine relieved CEO David Anderson of duty in February and hired Granger in April.

The company reported average production for the second quarter of 2013 ended June 30 of 47 million cubic feet of gas equivalent per day, off five per cent from the first quarter. Liquids production was 2,600 barrels per day, down 10 per cent.

Lone Pine volumes have declined because it hasn’t been investing to replace production. Its adjusted second quarter net loss was about $12 million.

Analyst Jeremy McCrea of Alta Corp. Capital, which is dropping coverage of the company, said he’s not surprised by Wednesday’s announcement.

“It was missteps by management, a higher leverage position to start off with and average to poor economics in their asset portfolio,” he said.

Granger agreed Lone Pine’s debt was too high but he said its failure was mainly due to crashing prices for natural gas.

“It was spun out to develop its great natural gas assets up in the Deep Basin,” he said. “It drilled a few wells but with the demise of natural gas pricing, switched to oil and started to drill at Evi. But it couldn’t transition fast enough.”

The restructuring is being implemented through the Court of Queen’s Bench of Alberta under the Companies’ Creditors Arrangement Act and in the U.S. via the United States Bankruptcy Court.

If approved, Lone Pine will initially carry on business as a private company, Granger said, with the noteholders as shareholders of common and convertible preferred shares. He said he hopes the company can start drilling again this winter.

Lone Pine must also obtain a new secured credit facility under the agreement.

Lone Pine Resources - 4 months after IPO

In July, J.P.Morgan has picked up coverage of Calgary-based Lone Pine Resources Inc. with a US$16 price target and Overweight rating, representing upside of more than 45%.

Analyst Katherine Lucas Minyard told clients the company offers investors exposure to a pure-play onshore Canadian natural gas-weighted resource base with high growth potential at an attractive discount. She also highlighted the upside possibility Lone Pine offers due to its increased crude oil production mix.

“Although we see near-term headwinds from high exposure to natural gas, a lack of operating history as an independent company, and the expected upcoming distribution of Forest Oil Corp.’s 82.3% stake, we believe the shares will capture broader market appeal through year-end as Lone Pine establishes an operating track record and the distribution overhang lifts,” Ms. Minyard said in a research note.

Colorado-based Forest Oil Corp. spun off its Canadian operations in June through an IPO of Lone Pine that raised US$183-million.

Lone Pine has an inventory of more than 2,600 drilling locations, with a focus on Western Canada’s Deep Basin.

Ms. Minyard noted its expected production growth of roughly 20% per year in 2011 and 2012, and the its ability to allocate more capital toward aggressive development as an independent company.

Natural gas accounts for an estimated 96% of Lone Pine’s total risked resource base ad 79% of 2011 production, which makes its near-term cash flow heavily dependent on natural gas prices. However, the company is pushing development of the Evi light oil play in Northern Alberta.

As a result, Ms. Minyard forecasts its production mix will shift from 21% liquids in 2011 to 29% in 2012, which will lead to a 70% increase in adjusted EBITDA.

Lone Pine Resources (LPR) shares fall in NYSE debut

Lone Pine Resources is an independent oil and gas exploration, development, and production company with operations in Canada within the provinces of Alberta, British Columbia, and Quebec and the Northwest Territories.

It was incorporated under the laws of the State of Delaware on September 30, 2010 and, until the completion of our initial public offering on June 1, 2011, was a wholly owned subsidiary of Forest Oil Corporation.

• Shares close at $12.54 vs $13 IPO price
• 15 mln shares sold in IPO, priced below $18-$20 range
• Trading on NYSE under the symbol LPR
• JPMorgan, Credit Suisse, TD Securities led underwriters 

NEW YORK, May 26 (Reuters) - The shares of oil and natural gas company Lone Pine Resources Inc (LPR.N) fell in their stock market debut on Thursday after the IPO priced below the expected range.

The shares closed at $12.54 on the New York Stock Exchange, 3.5 percent below their $13 IPO price.

The company, owned by Forest Oil Corp (FST.N) and with operations in Canada, sold 15 million shares at $13 each in the IPO, well below the expected price range of $18 to $20.

After the IPO, Forest Oil owned 82.3 percent of Lone Pine's common stock, which it intends to distribute to its shareholders within about four months.

Lone Pine will use the IPO proceeds, along with borrowings under its credit facility, to repay debt owed to Forest Oil.

Lone Pine had 376 billion cubic feet equivalent of estimated proved reserves as of Dec. 31, 2010. About 71 percent of that was natural gas.

Lone Pine trades under the symbol "LPR" on the New York Stock Exchange.

JPMorgan, Credit Suisse and TD Securities led the underwriters for the IPO.