Interview Part IIIncredible. He is still talking about the firm drilling 20,000 boe/d equivalent by 2020.
Clearly, the stock market is telling us those 20,000 boe/d will not go to current shareholders. The firm is on a very tight rope here. $12M left of unused credit lines...supposedly back to $15M as we are cash flow positive and not drilling this quarter.
To get the production behind pipe going, it seems we need refrigeration units...$5-6M dollars and clearly this has been an issue to finance. That's how tight things are now. Thanks for all the share buybacks earlier this year!
So much potential, and yet so little value remaining for shareholders. This is a classic value trap. If oil were to zoom up, this clearly has the multi-bagger potential but being down 90% on my initial investment, it is hard to get excited about any potential right now.
I would like to see more insider buying at these levels. If this firm is in such good shape, they should be buying massively. Come on, $2M gives you 10% ownership, it would be a no brainer if things were not so dicy. At least that is my interpretation.
Look at Lonestar Resources (LNREF), they are highly leveraged buy at least found a private equity firm (IOG) to commit $100M for drilling opportunities in the EF patch. IOG gets a specified return on their committed investment, LNREF gets 10% of WI until then (and only 10% of the drilling cost to pay) and once they hit their return, the WI reverts to LNREF to the tune of 90%.
This external funding does not increase debt, and does not dilute shareholders, at least not directly. Of course, it takes away some of the promised 20,000 boe/d to a third party but, obviously, if that solution actually took us to 20,000 boe/d by 2020, everybody would be happy.
Heck, Mass might take it private with the help of PE firms. That would be the way to get really rich for him. And come back to the market two years from now at 10x its current value. How about that Crazy? That would make me go crazy too...and I do think it is a possibility at this point in time...