Are you kidding! This is a giveaway. Management says that the LA Properties had a PV-10 of over 90 Million yet it seems that the management gave up 70% of those properties plus ORRI in the other properties ( OK and WY) for 17+ Million. On top of that the first 6 Million will be used to develop the LA properties which the company now controls 30%.
If I'm correct with this description, management either lied to us about the property values, are incompetent or worse.
I can't believe that they couldn't find a drilling fund or group the would have paid for 100% of the drilling cost for 50% or less of the production after drilling cost were recovered. Per well not the whole concession.
I understand your frustration with Armada stock price being this low. I was a former Mesa shareholder and didn't like the ratio but their must have been a bigger plan and I'm guessing management was thinking long-term on the capital structure. Remember, previous Telefuncte owners and Randy Griffin owned a large chunk of all shares so they took a bigger hit than us retail investors.
I believe its a sacrifice for brighter things to come. They failed going at it alone and burned up cash flow---big bet went awry with a mechanical failure. Now, they are out of options. With the stock being on the OTC and being this low...forget about raising that much money.
The approach they took was innovative and necessary. It allows the company to workover wells now and drill a new well in LA. They won't get all the revenue due to the royalty agreement but the plan is to get at least 70% to start and then less as the other tranches are funded. Considering their isn't enough cash on hand or cash from operations to fund this on their own, it may have been the best approach. Going the route of the banks is too risky considering banks want collateral and cash flow to back up the loan. F&M already had them paying additional interest payments to cure a deficiency.
I want to say congratulations to Armada and management for pulling this off. it all makes sense now. This is why they brought on board Marceau Schlumberger. He is a partner in the investment firm.
The stock will be weak until the plan materializes. Even though cash is coming and prospects are good, most people (including myself) will not buy into this now until we read about increased production (next likely catalyst) and initial BPOE flow rate from the new well they drill in LA.
Sounds like we will be waiting until the end of January for information on the new well and plans for OK, and WY.
I'm generally satisfied with developments. The LLC will have little impact on Q4 and 2013 earnings I think
I still stand by what I said before. The company should have gotten better terms in this deal.
As I stated before, the 6 million is being spent on developing fields that they will only own 30% if the whole deal is completed. I can't believe that a 50/50 development plan could not have been secured from third parties such as oil companies, drilling fund, royalty funds and others. If production will be enough to maintain current cash flow that it will offset the reduction the ownership, as stated in the press release, then why wouldn't banks, other loan funds for this.The collateral would be the oil reserves(production) itself.
I own small two oil company stocks in the same situation as Armada and they were both able to obtain loans to fund drilling. So I know it can be done.
On top of that, if the drilling in WY is productive as we all hope. The ORRI given away in this deal will be worth well over the 17.1 million money being offered in this deal.
This deal doesn't seem to be arms length to me. Offer it to independent third parties to see if the fair .
I be glad to entertain anyone that can change my mind..