RE: RE: RE: RE: RE: RE: Disaster Sometimes averaging down is a reasonable solution. Other times, it's simply throwing good money after bad.
At $13, I'm still not convinced. There are the $300MM in converts that mature at year end and they will create significant dilution as they convert at 6% discount to market. Be optimistic and assume $15 convert price - that adds another 20MM shares or another 35% dilution. But if you want to be conservative (which is prudent), you can expect lower convert price and even more dilution. That drops NAV from around $15 to well below $10.
So the risk is another ~30% loss to get to NAV from current levels, vs the potential for significant upside IF drilling success on high risk, high return targets. A gambling man might take those odds.
Regardless, management needs to fall on their sword. And there needs to be clawbacks for CEO pay after such a disastrous few years - the bribery scandal and this reserve bombshell would normally be cause for instant CEO dismissal.
Frankly, this reserve debacle is inexcusable - the market was being led to expect ~20% downgrade - but was actually closer to 70%. Shareholders just saw ~$1 BILLION in value VAPORIZE. But knowing how "smart money" works, I bet the CEO keeps his job, and everyone shrugs their shoulders - after all, it's not "their" money, only their bagholders, er, clients money...