RE:RE:Well, oil is up (substantially)...I share your curiosity on Bonterra and Surge. I believe that in both cases management bet on the cycle being “normal” and their being able to bull through. Funny, I looked up the numbers for 2016/17/18 this morning to try and put current circumstances in perspective. I recall being torn then but, in the end, went with their judgement and doubled down; and as a result got caught a lot closer to the wind than I ever imagined sailing. But I don’t hold this against either George Fink or Paul Colborne; they are both stand-up gentlemen and really do have their shareholders first in mind. Indeed, they both saw the issue as their shareholders depending on the income stream; and went with the risks of protecting that. In retrospect, the dividends should have been scaled back more smartly; and things would be in at least slightly better shape now that we really are looking at the turn.
The cash should have gone to keeping the balance sheet safe; but I am a heretic on reclaimation. There is reclaimation that needs to be done, but there is a lot that would and should be just moth-balled and would be brought back into production as circumstances evolve. Idiotic cover-your-rear-end regulation is driving what has become an incestuous cottage industry. Reducing book liability that the regulations define and keeping people employed are the silver lining in taking subsidy money, but it is an issue that is far from settled and is not “following the science”.
Bonterra’s hedging is Greek to me; driven by bank covenants I gather. I am only guessing but would think that having been forced to hedge to get their sign-offs on banking, they kept it on as short a leash as they could, betting on better prices sooner – which has been the case.