Expected Company Sale
Jeremy Raper has recently highlighted an interesting setup at Otto Energy which holds a number of minority interests in producing oil and gas wells across the Gulf Coast. The company launched a strategic review in March after a 48% shareholder said it wants out. Management seems highly focused on the company sale. In June, the CEO was replaced with a caretaker, who will oversee the sale and will receive a A$300k bonus if the transaction gets completed by Mar’24. OEL has also issued an update saying there has been significant interest in the company and its assets. In a sale scenario the potential upside could be considerable as the company currently trades close to 1x FCF – i.e. EV=US$27m on assets that should be generating around US$23m of annual FCF. Half of the market cap is in cash. The company has also quite an elevated US$5m G&A expense, which could be easily eliminated by a strategic buyer. With 6 months into the strategic review process already, the resolutions is expected before the year-end.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.