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Strata Oil & Gas Inc. Message Board

  • wannamakemoneytoo wannamakemoneytoo Jun 30, 2009 7:37 AM Flag

    Future costs --> dilution?

    Ok, I admit it: I sold most of my shares yesterday. (Was lucky to get them below $0.20. And you never go broke taking profits.) But I still own a tiny portion. What I do not understand or where I do not understand all your optimism:

    The feasibility study said: "Capital costs to drill and complete all wells and construct facilities without an on-site bitumen upgrader were estimated to be about $US1.6 billion in 2007 dollars." That's for 540 production wells. Of course not all 540 wells would go into operation at once. On the other hand you need a certain amount of wells to be able to operate the huge needed infrastructure cost efficiently. (Not comparable at all with a lonely pumpjack that can operate efficiently out in the Texas desert.) So let's assume Strata starts with only 54 wells. That would still mean a demand for capital of about $180 million. (Probably more because the smaller the less cost efficient.)

    Strata has 83,180,688 shares (fully diluted) if their numbers online are correct. Take the actual price of $0.50 and you get a market cap of about $42 million. And now Strata needs several times that amount (e.g. those $180 million above) to start production?! That means new shares. Mountains of new shares! And that means massive dilution. I'll buy back my already sold shares after that has happened, but not earlier.

    What do you think? And don't shrug this aside as bashing. If you answer, please answer with plausible arguments. Thanks.

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    • > who in the hell do you think is buying these shares in massive doses ? Sure as hell not widows and orphans .

      Ummm... actually for every buyer there is also a seller. (Only buyers are excited right now and are acting more aggressively. But that can change.) Or what exactly was your point...?

    • The real deal ! ...... who in the hell do you think is buying these shares in massive doses ? Sure as hell not widows and orphans .

    • Mike: In my ears "full-cycle exploration" doesn't necessarily sound like they intended not to produce. But you're probably right: They only explore and don't plan to produce. In this case of course there's not that massive dilution. (Thank god!) The feasibility study states: "ESTIMATED DRILLING AND TESTING COSTS Based on industry data for wells in the area, total drilling and completion costs are estimated at $625,000 USD per well for a J-well to a depth of 625 m. This estimate is based on a full-field development process. Well costs for initial testing and/or a pilot area will likely exceed this estimate." That's still a lot of money for such a tiny company. At the end of 2007 they had cash and cash equivalents of just $27,963. Anybody knows that happened since?

      Yes, *I* said "the strata guy". Because in that post you were reporting on your phone call with him. If "No dilution of shares" was not a statement of him but of you I apologize for the misunderstanding. (Next time you might want to declare more clearly what is a quote and what is a mere addition or notion of yourself. Thanks.)

      Yes, I discovered the company news only after I had sold most of my shares (with a more than nice profit I may add). But since there were no major surprises in it I will not change my strategy for now. Buy low, sell high. Waiting for the momentary excitement to calm down. In case things develop faster than expected I still own a few shares.

    • you will be kicking yourself when you could have had $20

 
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