Canadian investors have largely steered clear of the Canadian energy sector in recent years; while some companies have indeed rebounded in recent quarters, thanks largely to an improving commodity price environment, the story isn’t always rosy in the oil patch, as investors remember the last time they banked on $100 oil (or even $80 oil for that matter).
Canadian producer Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) recently announced plans to merge with rival Raging River Exploration Ltd. In an all-stock deal, which Baytex’s management team largely believed would add value to the company and increase its stock price.
Considering the fact that the proposed deal would lower the company’s overall debt ratio, improving a rather bleak picture for investors who have been dissuaded from Baytex for some time due to the quality of the company’s balance sheet, Baytex’s share price has actually declined approximately 10% since the announcement.
This drop has provided insiders at Baytex with what they have perceived as a buying opportunity. Approximately 125,000 shares of Baytex have been bought by insiders in recent weeks, indicative of improving sentiment among management that the market is incorrectly pricing the company’s shares at this point in time.
As always, a reminder that insider selling is in no way an indication of the direction a stock is expected to move in the near-term, and long-term investors should assess the fundamentals of said company and consult an investment advisor before making any purchases.
Invest wisely, my friends.
