Ten days ago, shares in Alberta Oilsands (TSXV:AOS) exploded to the upside when the company announced that the Government of Alberta had cancelled their oil lease at Clearwater, and must repay AOS $51 million (or approx. $.24 per share) plus interest as part of a government compensation framework for cancelled contracts.
This is the second dramatic turn of events for Alberta Oilsands recently. Last year, the previous AOS board and management were overthrown in a bitter proxy fight for control of the company. Dissident shareholders, although lacking in oil patch experience, were able to convince investors they would be better stewards of the company.
New management, led by Interim CEO Binh Vu, took control of AOS last summer and have since diversified the company's asset base into Africa. The market had yet to pay much attention until it learned of the incoming government cash pile last week.
As a result of the cancelled Clearwater lease, the AOS war chest could swell to more than $60 million at a time when few Canadian juniors have any cash to speak of. The disposition of other AOS assets could see even more cash coming in to the company.
Despite the nearly six fold increase in the AOS share price over the past month, the company’s market capitalization today is only approx. $33 million, discounting management’s likelihood of seeing the government’s cash, and/or their ability to spend it wisely. As the government’s intentions become clearer, that gap could narrow. For now, the market holds its breath.
To chalk this up as simply a case of good luck isn’t the whole story. New management had a vision to unlock value at AOS, went to great lengths to take control, and have so far been able to deliver - albeit with the help of the Alberta Government. What AOS will do with their newfound war chest is their opportunity.
The turn of events at Alberta Oilsands Inc. reminds investors that sometimes juniors can surprise investors to the upside.
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