RE:Has to be... Good post Kav.
The disclosure has been so weak with these guys we are left with looking for stories to fit the news flow. The financing is a flow through so the money has to be spent on drilling. They are active drillers anyway, so any purchase could just come out of the existing pool of funds if the lenders don't object.
I don't think that is what is happening here though. I think they got a little nervous with dropping gas prices, having a bunch of DUCs they want to complete and building a new gas plant at the same time.
I believe, but haven't confirmed, that they have an informal arrangement to drop their credit line balances to 100 million or less this year. The banks are doing them a favour by not requiring a public humiliation like Petrus went through every quarter before they recapped the company. Don't forget these guys restated reserves and type curves last year (down in a higher priced environment, pretty rare). It would have made a few people angry at the banks. The goal was to grow out of the problem but with Q3 and annual production below forecast they probably had to sell stock.
frankly I would prefer a few small takeovers. It would lower the decline rate if they could pick up some older production.
At some point these guys need a more appropriate debt structure. It would be more expensive, but at least they could do whatever they want on a timely basis. Debentures, term debt and a bank line or term debt plus a bank line. Surge and Bonterra are the most comparably sized companies that have them.
one thing about flow thrus. That stock usually comes back to the market quickly. Expect most of the non insider buying to be dumped as soon as they are close to even.