What does this sudden news release mean for Cub Energy:

1) Cub Energy has de-risked itself politically, as mentioned in the news. This company was getting a huge discount before because of fears that Rebels/Russians would takeover their assets in East. This happened to some assets in 2014, so the fear is justified. This is no longer an issue.

2) Cub Energy has also de-risked itself from a company balance sheet standpoint. Yes the cash flow will be reduced, but who cares about revenue if the liabilities/debt are too high. Natural Gas rates are very good right now, but Cub Energy has gone from almost 1000boed in 2018 to now around half of that. That means even with $500k USD profits, cleaning the books would take several years, assuming gat prices stay above $6 an MCF for the next 5 years, which there’s no certainty.

3) Cub Energy has also sold the Uzhgorod lease for $970,000USD, which means it’s only asset is the RK Field and this is more a utility asset then a regular natural gas producing field.

So what does this all boil down to once both asset sales are complete and we are left with cash and the RK field. Lets take the last quarterly results and combine them with what we are expecting from this deal.

-          Last quarter came out 2 weeks ago and the Assets were at $10.8 million USD($5.14 million being cash) and liabilities were $10.93 million.

-          Uzhgorod will add $970,000 USD in cash once the deal is completed

-          Deal announced today worth $10.6 million USD will reduce the debt by $8 million and leave around $2.6 million USD in cash

So let’s start adding these up. We don’t know RK’s value, but the company wrote off over $10 million from that asset, so I’m guessing that will be added back, plus the generators that were purchased as assets. That being said, lets assume for a minute that only cash is left on the assets, which is $5.14 million.

CASH: $5.14M(current cash on hand) + $0.97M(Uzhgorod) + $2.6M(KUB Gas Sale) = $8.71 million USD or $11 million CAD based on today’s rates. That works out to $0.035c CAD per share just in cash. No value for RK added. Most juniors trade at 2X cash just FYI.

DEBT/LIABILITIES: $10.93M –$8M = $2.93M left in Debt/Liabilities. This is clearly mentioned on the news release.

So what are we left with in the end, and this is a rough estimate, as well as assuming both deals close:

-          $8.71 million USD in CASH

-          $2.93M million USD in Debt/Liabilities

RK Field which is worth quite a bit. Last quarter it cash flowed $178K USD for only half a quarter, so it would be safe to say that $300K cash flow per quarter is realistic, or around $1.2 million USD per year. $178K was revenue from electricity sales and cost on the books show $67K USD, so the margins are good.