Petrobank's spinoff of PMG is approved

[dan_s]

CALGARY, ALBERTA--(Marketwire - Dec. 17, 2010) - Petrobank Energy and Resources Ltd. ("Petrobank") (TSX:PBG - News) and Petrominerales Ltd. ("Petrominerales") (TSX:PMG - News), a 65% owned subsidiary of Petrobank, are pleased to announce that our proposed corporate reorganization (the "Reorganization"), which will result in Petrobank shareholders receiving Petrobank's proportionate interest in Petrominerales, has been approved by the shareholders of each of Petrobank and Petrominerales and has received final approval of the Court of Queen's Bench of Alberta. The Reorganization will result in a newly incorporated company ("New Petrominerales") acquiring all of the shares of Petrominerales, and shareholders of Petrobank and Petrominerales receiving shares of New Petrominerales. Petrominerales will seek final approval of the Supreme Court of Bermuda (the "Bermuda Order") on Monday, December 20, 2010 and the parties anticipate receiving a final tax ruling from the Canada Revenue Agency (the "Tax Ruling") by December 21, 2010.

Assuming the Bermuda Order and the Tax Ruling are each obtained in form satisfactory to us and all other conditions to the Reorganization are completed, we anticipate the Reorganization will become effective on December 31, 2010, such that Petrobank shareholders of record as at December 31, 2010 will be entitled to receive approximately 0.615 of a share of New Petrominerales for each Petrobank share held. The ex-distribution date for all Petrobank shares to commence trading without the entitlement to receive New Petrominerales shares would be December 29, 2010.

[halvin]

Dan,
Do you feel it is more advantageous to buy Petrobank before it spins off Petrominerales or after?

[dan_s]

I bought Petrobank last week on a dip but the answer to your question is "who knows". PMG may take a dip as PBG shareholders that get it as a dividend decide to sell it. PBG and PMG will be in the 2011 Sweet 16 so I want to own both. They are totally different companies.

For U.S. shareholders the distribution of PMG to PBG shareholders is a taxible event (i.e. an in kind dividend). That fact may be depressing the share price so we could see a significant move up in January. IMO there is no reasonable explanation for where PBG trades today. The fundamentals deserve a much higher share price. My Fair Value estimate is $75 for PBG.

Petrominerales (PMG.TO) currently does not trade in the U.S. on the pink sheets like Petrobank does.

If you use E-Trade (or another on-line) brokerage you can buy stocks on the Canadian exchange by opening a “Global Trading Account”. If you already have an account with them it is easy to qualify. It takes about 10 minutes to set it up on E-Trade.

[mdwitte]

PETROMINERALES LTD (PMGLF.PK)

[k1f]

Dan, How do you see the "taxable event" consequences playing out in this spinoff? This is the first I've heard of it.

[dan_s]

I will call the company to get some clarification but I think PBG will receive a taxable dividend equal to the market value of the PMG share on the day they get it.
Normally, you would split your basis between the two companies. I think this has something to do with the fact that it is a Canadian company.

[prince_jake_33]

Thanks for information on PMG. I talked to Schwab people and they stated that my orders on petrobank were placed on the Toronto exchange and not on our pink sheet even though I used the pink sheet symbol.
I used the symbol PBEGF quoted by Midwitte and that comes up on my streetsmart Pro just as the petrobank symbol does.
So, looks like all is well. I really dont understand this stuff but should become enlightened.

[dan_s]

I'm currently working on a Company Profile for Petrominerales which will include my Net Income and Cash Forecast plus a Fair Value estimate. It looks very good.
I'm also going to work up a profile on Petrobank "post spinoff".

The primary reasons that I'm so bullish on these two is that (a) they are both heavily weighted to oil, (b) both are trading well below my Fair Value esimates, and (c) both have HUGE upside within their existing inventory of projects.

Dan