I am wrongAs everyone knows by now, I am wrong to have said CWV will not do a PP any time soon. With today's announcement that they will issue 13.7 million shares at
.95 is very surprising. Their latest presentation did say they have $19 million in cash and analyst report did say they will exit 2011 with over $26 million in working capital. Page 8 of their presentation also shows that they needed between $32 to $63 million to drill 20 to 43 wells in 2012. Now with the added capital from today's equity issuance of $13 million (possibility of going to $15 million with over overallotment), this should give them 26+15= $41 million in working capital to start 2012. Now add in their production revenues through out 2012 that will continue to rise and exit the year at over 2000 boe per day, they should have enough cash to achieve the higher end of their well total (above 30 wells drill in 2012).
Reasons why they did the PP now:
1. This company has a history of doing things quickly so they probably wanted to speed up their drilling activities (remember, they announce their 2012 drilling same day YPF made their big discovery announcement) - speeding up things is always good so not a bad decision if that's the case
2. "the underwriters have agreed to purchase, on a bought deal basis, for resale tothe public". Given the limited shares outstanding, management wanted to increase the float to make the stock a little more liquid so more investors can get on board.