CEO is a wheeler dealerAlways flipping assets.
He is a smart oilman with some good deals and great timing in some cases but had a track record of major F*ck ups too.
He threw the shareholders under the bus when he caused the last massive dilution at $.59. That was one amateur move and I was shocked at the financing and pissed when he further increased it. . It is because of the last flow-through financing that the stock is lagging the entire sector and not participating in the oil rally. He destroyed his long-term shareholders. He is himself a big shareholder. I could not believe that he would massively dilute the equity at rock bottom prices.
Is this new deal a smart move only time will tell. Just before the last bottom fell out of the oil market he made big light oil acquisitions and put the company into massive debt. That was horrible timing that gave total control of the company to lenders who came close to liquidating the company. I hope he has learned a big lesson from that deal.
This time it is a bit different he is buying when the oil market has recovered, so he would be again paying top dollar for the assets. The difference is that he is issuing shares and assuming a little $15m debt and NOT borrowing money to pay for the acquisition. He will cause more dilution but he is not putting the company at risk like before. Not too long ago he sold 2700 barrels for $106m for a similar price. So he is buying back and some additional.
Now, this deal will reduce the debt to cash flow ratio. Increases the light oil to 50 % of the total production. Takes the exit production to over 20k. Increases FCF. All-in payout ratio @ WTI 65 is only 56 % which means that he can reduce the debt faster.
Even if the bottom falls out of the oil market again this purchase does not put the company at risk and at the mercy of lenders to the same extend.
This deal will cause further dilution. maybe one day he will pull a reverse split and reduce the number of shares. The good thing is when the shareholders suffer he suffers too because he owns shares of the company.
I don't find anything wrong with this deal. I think is a good deal if the oil prices stay over WTI $65 for a few years. CEO knows the oil business and is capable of picking up quality assets.