RE:New board memberDoes the addition of Mr. Kleckner to the board mean that Vermillion is looking for a buyer?
He's in his mid 60's, with 35+ years experience. He's a veteran O&G player who was CEO of a company that he sold about a year ago.
Kleckner's got a lot of money and could do whatever he wants. He was wealthy even before he got his golden parachute this year. He can do whatever he wants with this time. He made the decision to join Vermillion's board... why? Is he going to be the next CEO? Is he lining up potential buyers for a sale?
The company he sold for 2.3B had 50k beo/d. Vermillion has almost twice that production but similar market cap.
We all know that the only thing holding Vermillion’s share price back is the amount of long-term debt. Management has said repeatedly their sole focus is shrinking debt.
At $60 wti, most O&G companies are doing amazing…at $80 they are absolutely printing money.
This is just a guess… but what if Vermillion’s management decided a year or so ago they wanted to sell the company but in order to maximize value had to wait until WTI was higher and get the balance sheet in better shape first…by reducing debt. They’ve done that and continue to work on that. They probably anticipated 2 years at $50 WTI…at $80 WTI, the timeline is accelerated as debt will destroyed faster than expected. Maybe $80 WTI won’t last but everyday it does is another day of raining $$$.
Management recognize they have a complicated business spread out in different parts of the world. So, they go get their sale guy Kleckner now, give him a few months to understand their business while they continue to reduce debt. In 3 to 9 months time…when Kleckner is up to speed, debt is much lower, he finds multiple or single buyer for the company. If oil stays above $60 for the next 6+ months, all of the major O&G players will have pristine balance sheets and be looking for acquisitions. The best money you can spend is buying an existing company. You get the rewards immediately instead of waiting to drill, develop etc which take years to payback and who knows what WTI will be at then.
Anyway, maybe I’m connecting dots that don’t exist but that’s my take on it.