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Abraxas Petroleum Corp. Message Board

  • jeffklienfelter jeffklienfelter Jun 22, 2011 10:06 AM Flag

    By popular Demand!!!

    You lease 10,000 milking cows and agree to sell 75% of your production at .50 per gallon the next year. Problem is that in the following year the costs of milking the cows have increased about 30% and it leaves you very little profits at .50 per. gal. In addition, milk is now selling at .75 per gallon and you have to pay the insurer for the difference of the milk produced you hedged. Price of milk is not going down anytime soon and in the meantime, you have no cash flow to milk those cows. You start contracting others to do it for you and give them more of the revenues from production.

    The head farmer, Boob Watson, is scratching his head and wondering how he got himself in this mess while paying himself and his buddies from proceeds (stock options). Farmer Boob goes to the bank and they turn him down for a loan. He's already sold most of the farm from the previous years, tried leasing other cows (Bakken)and failed, sold more shares of the farm to investors (dilution), thereby creating more ownership and is running out of options. Farmer Boob and his helpers eventually agree to "sell the farm" for pennies on the dollar to a company that has the resources and skills to milk those cows.

    Get it people???????

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