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,
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
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 & 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,
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
More risk weighted to higher
levels due to rig availability, and even
Some extra costs for rigs
All this factored
These are some of the reasons
I am more comfortable
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.
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.
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
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
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.