In short: The battle he lost. A year ago he was "fighting two battles" — for MEG and for the Canadian energy sector; asked about it now he says "one out of two, right? You didn't get MEG," and moves straight to the sector win. No live view on the asset or the price.
MEG is the deal he lost. A year earlier he was running a hostile bid for it while simultaneously campaigning for Canadian energy policy change; the bid went to Cenovus instead. Asked about it now he scores it "one out of two" and moves on — he offers no view on MEG's assets or valuation today.
Its relevance is indirect: with MEG gone and Canadian SAGD now held ~95% by five companies, he says the consolidation window has closed, which is why his own growth is now organic rather than acquisitive.
3:15One out of two, right? You didn't get MEG. But boy are we talking about a different landscape for the Canadian energy sector right now. We're talking about Canada as an energy superpower. I've counted not one but two pipeline proposals with government support. You must have been a good boy at Christmas because you're getting all your wishes.
In short: Consolidation reference — the just-closed MEG takeout (a former 6–7% Smead position, exited in the deal) is the example of the "cleanup" narrowing the oil opportunity set; came alongside the Vawn asset swap between Cenovus and Strathcona.
6:57And then you had the Vawn asset swap with Cenovus and also Strathcona. I think we're going to see a continued cleanup at times. There might be some marginal sales from one of the SAGD players to the other where they can patchwork better scale together. It makes better unit economics. But it shows you that in the oil world, it's more narrow today.
In short: Cited by the host as the recent "huge public battle" — context for the question of whether smaller producers like Baytex should be consolidated into larger players. Lundberg pushes back ("why?"). Industry-consolidation reference, not a stance.
31:11com or visit the link in the show notes. — Let's stick with M&A. I know I make CEOs uncomfortable. I kind of like it. — It's fine. Let's talk about it. — because, we just went through that huge public battle for Mega Energy and there's a lot of fund managers who believe the whole space just needs to be cleaned up and smaller players like Baytex need to be part of larger players.
In short: Position converted in the Strathcona deal. "We took our MEG shares in shares — didn't sell." Disappointed the deal's US tax treatment gave full capital gains (couldn't roll the gain forward): "I really didn't like how the board treated us as shareholders in the end." The Christina Lake facility (60k → 108k bbl/d) is his DD&A example.
1:00:27You're going to have to wait for that. Do you have anything for us today on the energy sector? Any any high conviction ideas? — Yeah, I mean, we we uh just a um you know, we took our meg shares in shares. Um we did not uh you know, sell any shares off of that deal. Um and what was really disappointing, Amber, is if you look at how Meg wrote their tax laws or their tax, you know, indication for the US holders, we got full capital gains on that transaction.
In short: Owned — the Strathcona hostile target. Deal will close (maybe a bump); at a 12% premium the arb community now sets the price. Waterous's incentives are "better for me than MEG's board." MEG + SCR both bring NOL pools — the combined entity can then fund cash-tax-funded premiums on the next deal.
45:14And I I don't know if that was on purpose, but I would I think that's what people want to know. How do you think about it? Yeah. So, the answer is that they'll close this deal. Like, that's very certain in my mind, which is like they'll get me. They'll get me. Um at a higher price or at the price on the table? Well, just just use what the market's pricing.
In short: Owned — pro pick #2. Single SAGD asset, mid-teens returns at ~book value, small dividend, buys back stock "at a dream price." Big deferred-tax-asset (NOL) pool: a same-basin acquirer could fund a takeout premium out of the NOLs over 2–3 years — "a banker's dream, a very likely takeout candidate."
MEG is a single-asset oil-sands company Smead owns. The special ingredient is its stack of "net operating losses" (NOLs) — past losses that shelter future profits from cash taxes. Smead's math: a buyer with similar assets could use up those tax shields faster, and effectively pay the takeover premium out of the tax savings over two or three years. That makes MEG, in his words, "a banker's dream — a very likely takeout candidate." Even without a deal, it earns mid-teens returns at about book value and buys back stock cheaply.
1:09:23what do we think we're really G to take out in value over the following you know two years 3 years 5 years is the existing NOS that Meg has net operating losses just to not skip over the nomenclature is what still sits on the balance sheet of Meg um these are what we'd call deferred tax assets and how you recognize these deferred tax assets is you create uh profitable income off your oil assets but you don't pay any cash taxes and so there is an argument to make and this has not been a unique argument I'm not the first want to make
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