Great write up. A word of caution, for U.S. investors this may be consider PFIC (Passive Foreign Investment Company). This designation creates some pretty big tax headaches. I love this idea though!
Perhaps. We can’t say we know what the best allocation for their cash is. Management has been quite successful in its mineral rights purchase. And debt repayment seems high on their list as well. 🤷♂️
Interesting. Why do you want them to be debt free when results are so strong/constant, I would argue some debt is appropriate (low risk) and funds could be deployed elsewhere at higher returns
Agree. I think debt free has the ability to create clearer decision making, both for individuals as well as companies.
Also, as Buffett said years ago, debt can become addictive when it works. Seems so simple, so why not just borrow more given our success. Have to be very careful following that path.
Thank you for the thesis. Do you know if there is any fundamental difference between OTCMKTS:PREKF (USD) and TSE: PSK (CAD) other than them being traded in two different exchanges?
This seems like a great company. However, have you looked into what type of risks they have, how prone are they to oil price swings, if they stopped acquiring new land today, what would be a fair price for extracting all known oil and minerals over the coming years? If oil price stabilizes around 70-80$ for the coming 10 years, where would the company be then? After all, it seems like stock price have suffered since IPO and has lost over 80% of it's total value at some point before recovering back, so the question is how the margin of safety has changed since then.
Osten, thanks for the questions. PSK is affected by the swing in prices of oil and nat gas but with little debt and little overhead, we expect them to remain profitable in all environments. Low downside, high upside. The company has million of unused mineral acres, so we believe its reserves vastly underrepresent the amount of oil and gas that will be extracted from its lands. If the price of oil stabilized at 70-80 we would expect them to perform much as they did this year, depending on whether operators increase of decrease production. Many companies are priced to perfection upon IPO, and PSK came public during the last oil bull run. We believe this explains its its price action post IPO. We plan to pass this company to our kids. That's our timeframe.
Great write up! As usual!!
Thank you, Rafael!
Great write up. A word of caution, for U.S. investors this may be consider PFIC (Passive Foreign Investment Company). This designation creates some pretty big tax headaches. I love this idea though!
Jamie, thanks for the heads up. Something for us to look into.
Nice write up. I've been watching this one for a while, should probably pull the trigger.
Thank you, sir.
They need to begin to retire shares now as they are going to be more expensive to buy back in the future.
Perhaps. We can’t say we know what the best allocation for their cash is. Management has been quite successful in its mineral rights purchase. And debt repayment seems high on their list as well. 🤷♂️
Interesting. Why do you want them to be debt free when results are so strong/constant, I would argue some debt is appropriate (low risk) and funds could be deployed elsewhere at higher returns
Ah, the old, “should I pay my mortgage off or not” debate. You’re not wrong. But if we ran a company, we’d prefer no debt. Call us conservative.
Agree. I think debt free has the ability to create clearer decision making, both for individuals as well as companies.
Also, as Buffett said years ago, debt can become addictive when it works. Seems so simple, so why not just borrow more given our success. Have to be very careful following that path.
Two valid points.
Awesome depth in this article 👏 trends look very promising, particularly the $400M decrease in debt over the last couple years.
I’ve not really ever looked at this company at all, but this write up definitely will put it on a watchlist for the near future.
We hope our work is helpful.
BTW, love the name of your substack.
Appreciate it 👍
Thanks for the write-up. Didn't know the company before, might try a position.
Glad we could make the introduction!
Thank you for the thesis. Do you know if there is any fundamental difference between OTCMKTS:PREKF (USD) and TSE: PSK (CAD) other than them being traded in two different exchanges?
No other material difference.
This seems like a great company. However, have you looked into what type of risks they have, how prone are they to oil price swings, if they stopped acquiring new land today, what would be a fair price for extracting all known oil and minerals over the coming years? If oil price stabilizes around 70-80$ for the coming 10 years, where would the company be then? After all, it seems like stock price have suffered since IPO and has lost over 80% of it's total value at some point before recovering back, so the question is how the margin of safety has changed since then.
Osten, thanks for the questions. PSK is affected by the swing in prices of oil and nat gas but with little debt and little overhead, we expect them to remain profitable in all environments. Low downside, high upside. The company has million of unused mineral acres, so we believe its reserves vastly underrepresent the amount of oil and gas that will be extracted from its lands. If the price of oil stabilized at 70-80 we would expect them to perform much as they did this year, depending on whether operators increase of decrease production. Many companies are priced to perfection upon IPO, and PSK came public during the last oil bull run. We believe this explains its its price action post IPO. We plan to pass this company to our kids. That's our timeframe.