No Warrants:After reading the financing details again, it's important to note that warrants were not part of the deal. This to me shows that management has great confidence in their upcoming drilling since they didn't want to give options for under $2 when the stock can easily exceed this mark by 2012 year end. I fully believe the overallotment option will be exercised bringing the number of shares to 15.74 million and $15 million in cash raised (we don't know how much fees they will pay for this PP, but shouldn't be more than $1.5 million). Total number of shares outstanding for the company will be 70.44 million and 76.54 million on a fully diluted basis.
This financing removes any financial risk for 2012 and allows the company to drill towards the higher end of their estimated drill totals of between 20 to 43 wells (see page 8 of their presentation). With completion of this financing, they should be able to drill between 30 to 43 wells in 2012 (remember capex per well is approximately $1.5 million) -- page 8 also shows that their estimated Capex for 20 to 43 wells was $32 to $63 million. Now based on what an analyst report suggested, they should exit 2011 with better than $26 million in working capital (from recent presentation, a large portion of that amount is $19 million in cash). Add another $13 million from this financing and that would bring their total working capital to START 2012 to $26 + $13 = $39 million. Now add their production cash flow positive in 2012 to this $39 million working capital to start 2012 and you can see that they will easily have enough cash to drill over 30 wells in 2012 without any worries of doing another financing.
After they complete 30 plus wells in 2012, their proven recoverable reserves numbers should be significant and production should we well over 2000 boe per day with high netbacks (over $40 per boe) using Petro Plus Program. With that type of activity in 2012, you can see why at least 3 different analysts have at least a $3 target price for next 12 months but the price could be a lot higher than $3 if they really hit some good wells. Therefore between now and December 15th (financing close date) will be the last opportunity to buy this stock below $1.