“Warren Buffett Effect”: Cardinal Energy rallies as billionaire Murray Edwards provides lifeline


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Monday’s debt deal is a positive step for Cardinal Energy, as it resolves a looming deadline to repay debt that was owed at month end. Photo by Aaron Hinks / Daily Herald-Tribune / Agence QMI

Cardinal canceled its dividend in March and also requested extensions on various tranches of its debt, which continues to stand at $ 204 million as of September 30. Lenders also reduced its $ 100 million credit facility during the year to $ 225 million.

Despite Cardinal’s challenges, Edwards’ investment in Cardinal could have a “Warren Buffett effect” on the stock and in the broader junior energy sector, said Michael Zuk, managing partner at Athena Capital Markets at Calgary.

“If someone who is a billionaire like Murray Edwards comes forward, there will be generalists who follow suit. I expect other juniors to catch a bit of a rally out of this, ”Zuk said, adding that“ deep value ”stocks in the energy sector are starting to come back in favor.

Additionally, Zuk said Monday’s debt increase with Edwards showed the lingering challenges junior oil companies face in raising money.

If someone who is a billionaire like Murray Edwards comes forward, there will be generalists who follow.

Michael Zuk, Managing Partner, Athena Capital Markets

Most small and mid-cap oil and gas companies are now forced to agree to terms on debt financing agreements with a double-digit interest rate and usually a sweetener like the option to convert their debt. in actions.

“What I’ve told all the issuers I speak to is that the cost of capital is still pretty high for juniors,” Zuk said, adding that this was also the case with Cardinal, where the The debt offering has an interest rate of 12% and provides options on stocks.

Another condition of the financing required the directors of the company to redeem the remaining $ 4 million in tickets that Edwards did not purchase.

The company’s board of directors includes John Brussa, partner and chairman of Burnet, Duckworth and Palmer LLP – which is the law firm where Edwards practiced law before launching various companies.

Brussa also sits on the boards of TORC Oil and Gas Ltd. and Storm Resources Ltd. and is president of Crew Energy Inc.

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