Its not necessarily a 'market is stupid' required situation (Although the market certainly is at times!). Yes the stock has behaved horribly for quite a long time, but then again so has OGXPY and PBR.
The fact is, Petrobakken/Petrobank's cost to produce oil is fairly high and that makes them inherently very levered to the price of oil. With the reduction we have already seen, and the prospect of a recession around the corner, people are bound to 'price in' a lower price of oil in the stock than we currently are seeing.
Combine that with the fact that the company ran up debt (Leverage is not a bad thing as long as things are semi stable, but it certainly adds risk to the model) significantly this past year, its a matter of very bad timing. If oil prices drop down to $60 for example, their payback period on those wells will become MUCH MUCH greater than they predicted (Their netbacks would go from $50 when oil was $100 to like $10).
Note: PBN creditors have NO recourse to PBG. I can see a long PBG/short PBN strategy working but the dividend makes that strategy very painful IMO...Specially given that PBG does not produce any oil yet.
Something else that has contributed to this company's long decline has been the issues they had with water seepage, below-projected pace of new wells and production being brought online, etc. In the past 1-2 months this seems to have reversed and they are finally turning 'on' wells they had prepared awhile ago. That may change the stock's relative-to-peer behavior going forward, at least to similarly oil-levered peers.
-Fernando
Disclosure: No position in either PBG or PBN.
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