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Swift Energy Co. Message Board

  • taylord97 taylord97 Jul 5, 2000 11:18 AM Flag

    Truth -- Conversion Of Notes ??

    In your #2010 posting, you made some intersesting
    comments Re price levels and the "notes". But, you also
    made a comment about the analysts treating these
    shares as converted in 2001. Keep in mind the diluted
    EPS reports, (and presumably) projections, already
    provide for the full effect of the conversion of these
    notes in the diluted EPS numbers. See my post #1476 in
    which I tried to clear up some confusion on this issue,
    that I in part helped to create. certainly my own
    estimates have provided fot this conversion in my diluted
    EPS numbers. Regards,


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    • Paradoxically, fully diluted best projects what
      will happen on the balance sheet side of the books.
      When those cv's become stock, the reserves, assets,
      etc get divided by more shares. It's very important
      in that regard. The balance sheet always uses actual
      shares outstanding.

      On the income statement, a
      late year conversion won't effect income much because
      the income statement uses weighted average shares
      outstanding. Q4 would have more shares for 50% of that quarter
      (11/15 - 12/31). Full year eps would reflect 6/52 of the
      new shares on the weighted average basis.

      think the bonds will get called only if they are deep
      in the money. That is, the stock must be more than 3
      percent higher than the conversion price because the call
      is at a premium of 103+.

      It seems we're all
      on the same page here, just looking at different

      Oil... OUT

    • Oil & Adesa, I fully agree that we have to look
      at fully diluted shares. I can't say it any clearer
      than you did ADESA; except to say that's the way the
      market views and values the earnings and anyone who
      doesn't is simply "KEEPING SCORE IN A DIFFERENT GAME".
      But OIL did make an interesting point that you may
      have missed ADESA. If this debt is converted late in
      the year, we would actually experience both the
      interest expense and the share dilution in THAT year. The
      accountants haven't figured out a way to present that impact
      on an on going basis. It's not a major problem, just
      an intereresting "enigma" that OIL has brought to
      our attention -- assuming I read OIL's point
      correctly. Seeking clarity!! Regards,


    • Oil,

      The fully diluted does matter.
      Assuming all goes well, those shares from the cv bonds are
      going to kick in. We are going to get diluted.

      Once they are deep in the money, they will get called.
      The actual interest rate doesn't matter becuase any
      rate is too high. The funds are already invested and
      those assets are fully at work. When calling them, SFY
      would not expect to pay up since it doesn't make any
      economic sense for the bond holders not to convert.

      So, once deep in the money, 6.5% is not a cheap
      interest rate but an expensive one! SFY saves aproximately
      $4.6M post taxes per year.

      The conversion is
      like issuisng stock at $31.5. It frees up SFY from
      that debt burden and they can then add more debt if
      they need to do more acquisiions, develop NZ, etc.

      Once deep in the money, not calling them would be

      The purpose of the fully diluted EPS is
      not backward looking, but forward looking. I think
      that's the way you want to see it also.

    • Various levels of production driving
      earnings forecasts.

      More risk weighted to higher
      levels due to rig availability, and even
      rig availability.

      Some extra costs for rigs
      last year.

      All this factored

      These are some of the reasons
      I am more comfortable
      around .53
      than .55 and above.


    • SFY isn't pulling back by its lonesome. Its peers
      are also taking a breather. Take a look at the links
      I posted for SFY vs. peers a couple of posts

      We had a nice run. A pullback and consolidation is
      not unexpected. The market is acting like oil is
      going back to $12 once OPEC opens the magic spigot.
      Natural gas prices are strong, and storage is low.
      Eventually fundementals will rule.

      The market is
      expecting oil & gas companies to overdrill, as has been
      their history. But I don't think it'll happen this

      Here is some evidence of disciplined

    • ..... on the SFY board. 20% plus declines are
      just part of being here or so you will hear, here. No
      place to go but up.

      Don:t think many of the
      bulls anticipated this decline, however. $29-30 will be
      a stopper for sometime to come. These stocks peaked
      last year mid summer and declined for months...history
      has repeated itself. Any earnings disappointments
      will send particular companies to the lockerrooms of
      has been performers.

    • Oil,

      They start drilling on July 22(old
      est. anyone know better?). It will take about 2 months
      to get to 15K feet so we should have some results by
      the end of Sep/early October.

      This will give
      a better idea of the Rimu reserve size. Don't know
      when they will announce final reserve estimates, but
      we only need to hit oil on drilling to get an uptick
      in the stock. Anyone shed any light on this as to
      timing of drilling and final reserve estimates?

    • The bid size has been lower than the ask size all
      day with most trades at the bid. Given this is a
      relatively low volume day it appears that no-one is watching
      this stock to pick up shares at a relative discount.

    • badly on the this stock since mid June. These include relative strength, money flow, etc. I hope they start to turn up soon, especially ahead of the earnings report.

    • I think the real upside will be production. My
      mcfe estimates are 3 months old. Nevertheless, I'll go
      on record with an estimate of $.59 to $.62 basic eps
      2nd Q.

      There's too much focus on fully
      diluted. As you know, f.d. is a "what if" scenario that
      assumes conversion retro to 1/1/00, elimination of all
      interest (after tax), and exercise of all

      The cv's are not callable until 11/15, so assuming
      conversion back to 1/1/00 will not reflect what actually
      happens this year. SFY will pay at least 10.5 months of
      interest expense.

      I don't think they'll call the
      bonds unless they are deep in the money. Besides, the
      rate is 6.25%. Where can you get dough at that rate

      The wildcard, of course, is NZ. When will results be
      in, i.e. when will the reserves hit the books? An
      announcement before 12/31/00 would sure be best. Get it into
      the year-end reserves report. If the announcement
      comes before 11/15, the cv's could get

      Enjoyed the chat.

      Oil... OUT

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