Petroteq Energy Inc.(OTC: PQEFF) TSX (TSX: PQE) is a clean energy company with a focus on the development and implementation of environmentally safe extraction technology for removing heavy oils from oil sands and oil shale deposits. With its patented technology and its carbon-neutral process, PQEFF has continuously set itself apart from other oil companies. This has made PQEFF the target of a takeover bid, which could bring additional volume to the stock – putting PQEFF stock at the top of investors’ watch lists.
PQEFF Stock News
The company’s patented CORT technology is already in operation on 2,500 acres at Asphalt Ridge – believed to be one of the US’s most oil-rich geographies. PQEFF has patented their cutting-edge technology in the US, Canada, and Russia, with plans to establish patents in 30 more countries. Planning for the future, PQEFF has also set up licensing agreements which are structured for a $2 million up-front licensing fee and 5% production royalty stream.
At the moment, production comes to a cost of around $25 per barrel, but this is more than offset by the high demand for oil. Clean energy penny stocks have also become popular among investors as companies realize the shift in public opinion. But public opinion aside, the company functions efficiently with a production rate of 500 bpd. PQEFF has long-term goal of reaching 10,000 bpd by 2024 which could be achievable considering its solid business model. Capitalizing on every aspect of its process, PQEFF sells the byproduct sand from its process for $10-$15 per ton.
PQEFF’s CEO R.G. Bailey released a shareholders’ update which highlighted the company’s continuous investment in R&D as it improves efficiency to achieve 5,000 bpd. Meanwhile, the company is working to become reinstated with the TSX Venture Exchange following a CTO issued in August by the Ontario Securities Commission.
With such strong fundamentals, its not surprising that PQEFF was offered a takeover deal from an undisclosed party back in August. The deal constituted the sale of 270 million shares at the premium price of 0.5 EUR – a 400% increase over PQEFF’s current share price. Since then, the company has confirmed the bidder’s funds of €120,000,000 through a third party. In order to reveal the bidder’s identity PQEFF signed an NDA and has announced that it is moving forward with its due diligence and has requested a production of documents from the third party in relation to the NDA.
Now, PQEFF has released PR confirming that Viston United Swiss AG has commenced an all-cash offer to acquire Petroteq Energy Inc. at a significant premium. Shareholders will receive C $0.74 in cash for each common share and all related documents were mailed to Petroteq shareholders as of October 25th when the offer began. After Viston United Swiss AG began the offering through its indirect wholly-owned subsidiary – 2869889 Ontario Inc – PQEFF stock saw a 207% increase overnight.
Viston United Swiss AG is clearly the reason for this excitement as the company invests in renewable energies and the environmental protection industry. Aiming to foster innovative technologies and eco-friendly fossil fuels, Viston sees now as an opportunity to take PQEFF to the next level.
Although PQEFF’s business model is centered on producing high-quality oil and clean sand through its versatile technology, for years, the company’s immense potential has gone unrealized. Operating under a leadership team seemingly unable to generate cash flow, PQEFF has lacked the financing necessary to achieve its overarching vision.
Since its inception in 2008, PQEFF has accumulated losses of over $97 million and nearly $20 million in total debt. As of Q2 2021, the company had outstanding options, warrants, and convertible debentures that amounted to a total of over 207 million common shares. With the management’s plans to continue financing its operations through the issuance of additional equity, investors have continuously found themselves at risk of significant dilution. This reiterates the management’s lack of strategic capital allocation.
With that in mind, the proposed tender offer has captivated shareholders’ interest as it paves the way for a new roadmap that grants investors the inherent value of PQEFF’s portfolio projects. In order to fairly compensate shareholders through this offering, Viston has secured over €420 million to complete the arrangement.
Under the terms of the offer, PQEFF shareholders are eligible to receive $0.74 Canadian dollars or $0.58 in cash per common share – a premium of 284% based on its current share price. For shareholders to receive the stated offering price, a minimum of 50 percent of all common shares plus one, must be tendered under the offer before February of 2022. But with such a high premium, Viston appears confident that PQEFF is unlikely to find a more competitive offer.
On the other hand, PQEFF’s management has recently finalized a license agreement with Big Sky Enterprises LLC in an attempt to regain investors’ confidence and accentuate the company’s potential. According to this agreement, Big Sky is able to use PQEFF’s patented oil sands extraction technology in exchange for a one-time, non-refundable license fee of $2 million upon the start of construction.
Additionally, PQEFF will receive a 5% royalty on all net revenue generated from the production or sale of licensed products from Big Sky’s plants. With this in mind, Gerald Bailey, PQEFF’s CEO, has assured investors that “if Big Sky successfully advances its plans through utilizing our technology, the company would have a potential long-term revenue stream”.
However, this update doesn’t appear to have soothed shareholders’ concerns as many point to the company’s history of entering licensing agreements to no effect. Rather than boosting revenue with the licensing agreements, over the last five years shareholders’ confidence has been routinely shaken by PQEFF’s faltered growth.
This comes after a series of departures from the company’s senior management. Most recently, COO George Stapleton has left PQEFF after just over a year in his position. Additionally, in August, the company’s founder and director – Alex Blyumkin – resigned, saying he wished “to move away from the daily obligations of running the business” to focus on his family despite remaining confident in the company’s new leadership.
However, with capital from the offering, PQEFF could be positioned for growth given its patented CORT technology and continuous R&D efforts. Regardless, this premium appears to offer shareholders an exit from the risks associated with the oil extraction industry as well as certainty and immediate liquidity. Whereas the current management seems set to continue on the company’s path of sub-par performance and volatility.
How to tender shares to the offer
Shareholders can tender their shares by calling their broker. Unless the offer is extended, accelerated or withdrawn, the deadline for shareholders to tender their shares is 5:00 p.m. (Toronto time) on February 7th, 2022. You can find further details here.
Investor @TheGuy870 is tendering his PQEFF shares with a belief that this offering could generate up to 4 times its current value.
PQEFF stock is currently trading at $.151 with a support near .1257 and a clear resistance at .1801. The stock has an increasing RSI of 68 which indicates the stock is slightly overbought. Meanwhile, the MACD just had a bullish crossover and accumulation is trending upwards. Together, these indicators could highlight investors’ bullish sentiment as they stock up on PQEFF shares in anticipation of the offering. Rather than chasing PQEFF stock at this current PPS, investors may find a better entry point after the RSI cools.
PQEFF Stock Forecast
On a macro level, the oil sector is booming and PQEFF will continue to stand out thanks to its patented technologies and carbon-neutral operations. However, it will be up to shareholders to determine whether the company’s current management is equipped to lead PQEFF in 2022. Clearly, the premium bid has added to investors’ excitement and may continue to drive up the PPS as it draws closer to the offering’s deadline in February.
With this offering comes new management and cash flow – both of which could position PQEFF for growth and allow it to achieve its production goals. In light of the momentum this offering may bring, investors could see a spike in February. However, there is also the risk of a sell off if Viston is not tendered 50% plus one share of the current float. Even if a sell off occurs, it would likely return the stock to its value pre-offering near $.13.
Considering that investors face minimal risk if the offering is not approved, this is a good opportunity to possibly make major gains on the premium offering which could drive the PPS to $.43 or more as it did when the offering was first announced.
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