Also, when does a board member step down and get paid out the remainder of 2 years.....only when the company wants him to keep his mouth shut. He likely disagreed with the direction they were going. Reading the tea leaves that was likely an indication things were not coming together on the asset sales and company decided it was time to work with the stake holders......i could be wrong but i think longs are toast. Ofcourse. The stock price likely has all this priced in considering we are barely over $1. So im not saying there will not be any rallies from here but it looks like there is hardly any light at the end of the tunnel.
I was bullish here but I think I was wrong. The advisors they hired are to help them restructure. Equity could be either massively diluted or wiped out via BK. The only way for them to avoid breaching loan covenant later in the year is to get back to drilling via asset sale ( which i truly expected to happen....but if it was on track why hire advisors to help them restructure ). Well I admit i was wrong here and unfortunately it has costed me in the 6 digits. Very painful. CEO is an #$%$....he mentioned returning shareholder value numerous times in February annual CC. These guys all lie. I was in EXXI when they had 700 million in cash and their IR guy said over a call "when was the last time a company with 700M in cash filed for BK"......it wasnt even 6months before they filed. Some of these guys are too stupid to know when they are no longer solvent. Unless oil goes to $60+ in a hurry these guys are going to have to restructure their debt. And equity will likely lose here. Also, even if they hang on to dear life and pay back difficiency. If they do not get back to drilling what happens when their revolver gets reduced again. I suppose they might have a chance out of this if oil increases but i think the advisors that have come on board are to help them navigate thru the financial piece of restructuring. This sucks. Frankly....should have listened to the bests and shorts and sold the rallies. Never expected oil drop to be so deep and down so long. What's unfortunate is oil will likely be $65 by year end.
"Every analyst is calling for prices to drop again".....lol.....the WTI chart is rounding the 2nd shoulder of the prettiest reverse head and shoulders pattern I have ever seen. This is about as bullish of a signal as you will ever get. The trend is your friend ..... We'll know in the next couple weeks. By then...your analysts will be singing a different tune.
I would have thought a deal would have been announced by End of June.
But if bids were recieved into early June. They need several weeks to narrow it down to who they want to move forward with and another 2 weeks for lawyers....that would make mid to late July realistic to have a deal done by then.
Their Q1 earnings report states they will issue a release at the earlier of when they have a definitive agreement in place or provide an update on their efforts by Q2 earnings call. So the closer we get to the q2 earnings call without a deal announced then perhaps they might not be able to get a deal that makes sense for the company. I am optimistic for several reasons that they will work a deal that gets them the cash they need to get back to the drill bit.
Clarification: i do not know if they generated $10M in cash. Could be more or less. But if you do the math they will come in around $60Mbin revs for Q2.
The midstream player wants the assets because it is a volume play for them. And they might end up paying more for RMI in BK.....everyone always thinks you get assets cheaper when a bank owns them. You get market price. And they likely will not want them in a BK scenarion because the volumes cant be met. The midstream folks would love RMI, they just need to see that the company can meet the volumes. I dont always believe what mgmt states, but i do think they have many interested parties....it is known they recieved more than one bid....which means it met the companies minimum requirements or the 3rd party would not have delivered the bid to the company. The question is did the bids get received before the revolver redetermination or after. I think some were before and some were likely after. The big question is did the reduction in the borrowing base scare the midstream folks away? I do not think it did, especially if they can divest Midcon or if Midcon divestiture is somehow tied to the deal.
Lets see. After paying back $88M they have $110M in cash. They generated roughly $10M in Q2. After making their largest interest payment due in August, the other one was already paid in April.....that puts them at $100M left in cash.
"odds of RMI selling are virtually zero".......really??? list out a couple reasons why you think RMI would not sell. Would love to hear your reasoning.
You are certainly entitled to your own opinion. Just keep in mind assets are easier sold when the market is trending up vs. down. I think if oil continues north, they should be able to divest midcon, RMI.....time will tell
Going long bcei is a call option on commodity prices. But i think a pretty good risk/reward. Also keep in mind the shorts will cover a good chunck on an assett sale. There isnt much more upside for shorts. And many of them are hedged with call options so their risk of not covering is not big, hence many tat are hedged have no reason to cover.
Bro.....i think you left off they have two assets that could be divested to expand their runway......RMI and Midcon. That isnt a investor "bailing" them out. My only concern is divesting RMI to a midstream player might be challenging due to their revolver being reduced, thus liquidity is now reduced by $88M. That didnt help. Now they likely need to sell Midcon, significantly improve their liquidity, so the midstream players bidding will have less risk and be more likely to move forward with RMI. If you see midcon successfully sold. Keep a close watch because RMI will likely follow right behind. Company is not as bad shape as many others. Yes. They need higher prices, which is possible in 2nd half. Look at natural gas...almost back over $3.....oil at $60 and they might skin by without breaching the senior secured loan conenant.
No reason not to trust them. I would have drawn down the revolver too. My issue isnt trust. Frankly, at this point they are mostly a product if their environment. They either have good bids on the table or they dont. My guess is they aint that good or they woukd have closed on one already. Time to make a deal.
......in fact, I am not holding my breath for RMI deal any more. I expect we will get to hear Carty tell us that they are still in the middle of the process at their CC and exploring all options. Smart money seems to figure this out well before retail....hence we are trading at $2. I suppose if oil doesnt get to te $60 range soon we'll be stuffing our turkey over thanksgiving with bcei shares because they will be much cheaper than croutons.
It is pretty simple. They need to get back to drilling asap. They can return mid thirty percent IRR in the Watteburg. Problem is they do not have enough liquidity to drill. After meeting difficiency they have 110M in cash available. They have interest due in August. They need to divest RMI and Midcon. They hired a 3rd party in Q1 to help with the process. If they divest successfully they will be positioned to drill and likely get out of this shxt hole of a ditch. If they can not divest, they have to find a way to restructure debt and improve liquidity. Maybe vis a 2nd Lien. I dont know. But waiting for this RMI divestiture has been painful and maybe wishful thinking. Why did Meritage walk? Who is at the table now and shy no deal yet. Maybe the ceo is a #$%$ and no one wants to do business with him. Who knows....