Eurasia Drilling Co ---> some crazy stuff is going on...

I have a positive long-term view on the oil price and therefore beaten down oil stocks (my current oil stock allocation is international and weighted 1/3 asset heavy companies, 1/3 service companies and 1/3 E&P companies). One of the beaten down oil stocks in my portfolio is Eurasia Drilling Co. which i bought at USD 11.30 per share last month.

Eurasia Drilling Co. is a onshore and offshore drilling and well service company. They own and operate a large fleet of land drilling and worker units (one of the largest in the world). They also own jack-ups stationed in the Caspian Sea. As you may figure from the name it is a Russian company.

I bought the stock due to:

• My positive view on the oil price
• The company was dirt cheap (trailing P/E = 5.3x, P/CF = 2.9x, P/B = 0.8x, dividend yield = 8.8 %)
• It seems like Russian companies are punished more than what they deserve due to temporary political situation
• Core investors had an agreement to buy out minority shareholders at USD 22 a share, more than twice the current stock price. The core investors would than turn around and resell the shares to Schlumberger, which would be given an option to buy the whole company within three years

The Schlumberger deal fell through in September due to regulatory issues, however it definitely gave me as an investor some visibility in terms of potential value. Today the share was delisted.

The company made a statement that it has been taken private and that a merger is going to be conducted between the company and a consortium of majority shareholders and top management. The shares are being bought from minority shareholders at USD 11.75 per share (smells kind of fishy at the given pricing point?). According to Financial Times minority shareholders are planning to sue and challenge the deal due to the low price offered (slightly above last closing price). The transaction has been recommended by the board, however we will see if the minority shareholders will let this one slide.

As for me I am happy with my short but sweet return if the deal goes through, however I am rooting for my fellow minority shareholders suing the company. 

Stock price development pre delisting:

                               Source: SaxoBank

Disclosure: I am long Eurasia Drilling Co.

I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. I have no business relationship with any company whose stock is mentioned in this article.