CRK looks solid, but ...Production growth looks great, cash costs will eventually be solid, and they have a nice land package. I intend to keep an eye on this one. One thing that I find absurd is their agreement with Forbes and Manhattan. Did anyone read the financial statements ending Mar 31rst? Please tell me this is not an industry standard ... exactly what kind of service are they providing for financings? I can understand the $800,000 + payment in respect of the original asset purhcase, but 300k/year + financing payments?
"In July 2009, the Company signed a three year service agreement with Forbes & Manhattan for consulting and advisory services. Payments to Forbes & Manhattan include a general fee of C$25,000 per month, or C$300,000 annually, success fees on equity or debt financings and bonuses on transactions completed by the Company. A “transaction” is defined as any merger, amalgamation, plan of arrangement, reorganization, business combination, take-over bid, purchase or similar transaction. As well, any strategic asset acquisition, pursuant to which the assets and business of the Company are combined with another corporation or the Company acquires more than 50% of another corporation and the Company is the continuing entity.
The Company may also, from time to time, make discretionary payments in such amounts and in such form as the Board considers appropriate in consideration for value provided by Forbes & Manhattan to the Company.
The success fee on financings is calculated on a graduated basis, with a fee of C$300,000 payable on financings in the amount of C$15 million or less, C$550,000 on financings between C$15 million and C$25 million, C$800,000 on financings between C$25 million and C$50 million, C$1,050,000 on financings between C$50 million and C$100 million and a maximum fee of C$1,300,000 on financings of greater than C$100 million.
The bonus to be paid on the completion of a transaction is also dependent on the value of the transaction and is calculated as follows: transactions with a value of C$100 million or lower - a bonus equal to 1% of the transaction is payable; transactions with a value above C$100 million, but lower than C$200 million - a bonus equal to 0.75% of the transaction is payable; transactions with a value above C$200 million, but lower than C$500 million - a bonus equal to 0.50% of the transaction is payable; and, transactions above C$500 million - a bonus equal to 0.25% of the transaction is payable."