Just read the latest corporate presentation.
Management is going to pay off the debentures due 2016 starting this month. The $300 million they are going to pay to buy the debentures has an interest rate of 3% while the notes that are outstanding have an interest rate of around 7%. Why would you spend 1/3 of the billion dollars to buy in debt that costs 3% when you could buy your own shares and earn a 10% dividend?
Also, the presentation shows that netbacks on production have fallen by $5 a barrel during the last 12 months.
Management is also purchasing shares in other energy junior companies that pay no dividend, so those investments are pure speculation that Petrobakken management does not even control.
No wonder the shares keep cratering. Any analyst that looks at management steps being taken has to conclude these guys are making questionable decisions. Why pay off debentures that are not due for 3 years when the interest cost is 3% and you can earn 10% if you buy Petrobakken shares and collect the dividend until the debentures are due. They could have purchased their own shares, hold until 2016 when the debentures are due, sell the shares and collected the dividend for 3 years.
I guess management has concluded that the shares will not appreciate so spend the money in paying off debentures (a type of debt). That action by management, the board, should tell all shareholders of Petrobakken a great deal.
Better not to invest in Petrobakken shares, better to buy shares in other small Canadian oil and gas companies
To answer your question: not so stupid as you think !
If you had read the press release attentively you would have noticed that not PBN-management doesn't pay the debentures voluntarily but the bond holders had a one-time-option as of Feb 2013 to have the bonds repurchased back by the company and they used their right. This - by the way - was the reason the share price declined significantly last year. PBN-Management made sure last year via asset disposals etc. that this doesn't lead to liquidity-problems. So your conclusions are misleading and a result of a lack of doing your homework !
I went to great length to explain that to him in a previous post. It's sad when people don't listen. It's dangerous when they continue to spread complete BS.
The stock has cratered, we are all upset. I am sitting on massive losses at this point. But I know this one will come roaring back. I have a huge buy order waiting to be placed.
Again and again, the biggest danger this firm and its Canadian peers face is the lack of infrastructure to export their oil. Hence bottlenecks and significant price discounts are going to be part of the game for quite a while. Can PBN ride the storm without having to do any fire sale or cutting back the dividend? I believe so. If they have to cut the dividend, so be it. The assets this firm has accummulated will sustain it for many years to come. My biggest worry at this point is an offer at let say $12 a share. A nice premium from this week's prices but nothing compared to where it has been in the recent price. That for me is my biggest concern.
Do your own D&D (in particular you richardleeds) and GLTA!