I agree. Current Mill management seems to have viewed joint ventures with suspicion. The new guy could do a lot more in that area.
It's really not that surprising that they ran into problems on the first well dealing with a new geological area. It proves that they need a better well design and I'm sure they will be learn and be better prepared next time.. It's not a 99% loss of oil they can drill for.
Welcome to the exciting world of preferred stock and microcap trading. Day traders are glued to their level II screens. I'm walking the dog or at the Club waiting for things to move - LOL.
The benefit is that sooner or later (maybe sooner in this case) DRL is going to want to raise equity capital. Banks always do. Bank stocks are really not all that exciting and bank investors want dividends (or the prospect of getting them eventually). Having all this preferred stock trading at 25% of par is an impediment to a capital raise since the preferred have to be paid a dividend for the common to get anything. It's easier to sell common if there isn't 250 mil or so of preferred stock ahead of the common.
They won't be getting to 10,000 BPD for a couple of years, but production is headed higher. I'll be happy if they hit the 5K mark in the next 2 or 3 quarters.
Come on now Trace, I haven't even mentioned the preferred stocks lately. I do stick by my earlier comments that at some point the bank is going to make a swap offer for common to the preferred holders as part of their capital raise plan.
Guess DRL is rallying in anticipation of PR getting their #$%$ kicked at the upcoming short trial. I think PR will lose so badly that they won't even have decent grounds for appeal. As I see it the whole Liberal govt entitlement philosophy is on trial. PR has certainly framed it that way with their public attacks on the "millionaire" bank.
I'm obviously not an insider - LOL. Be critical if you want. Just putting a little perspective on a 10 mil (if that) well. The stock has lost 6X as much as that in market cap over the past 6 months. They haven't executed on the deeper wells but have increased production and cash flow from the shallow stuff.
You can get the budget numbers I cited on the company's investor presentation on their web site. Perhaps you should write to Tag if you want the amount spent on Cardiff. I've written to them a couple of times on other issues and gotten a quick response.
Tag has a capital budget of 60 mil. The last 2 shallow wells were very successful. The 2 East Cost wells (including the abandoned one) had a total budget of 20 mil. SO that was about a 10 mil well. Maybe less since they abandoned it after 55 days and it was budgeted for 70.
Tag has operating cash flow guidance of 40 mil for the fiscal year. They will exit the fiscal year at a higher rate than that. So they blew about 1 quarter of operating cash flow. Guess that means the company is finished according to you guys. If you really think that's a huge disaster for the company and it's all over for them then please sell.
True statement, but very misleading. The relevant number is enterprise value (including debt and preferred stock), not just the market cap of the common. Most of the value is still with the leases and production.
They need to start getting some outside customers and joint venture partners. Mill can't be the only customer for a deal to work.
So they spent about 10 mil on an exploratory well in a new area that didn't work out. That tells you they won't make it? Disappointing but hardly the end of a company with strong cash flow and increasing production. Their shallow drilling is doing well enough to afford a couple of "home-run" swings every year. They averaged 1,750 boepd in the last quarter, are at 1,950 now and on target to end the fiscal year at 2,300 boepd. Company has no debt, infrastructure and over 40 mil in cash. Give management credit for pulling the plug early to limit expense / risk on the well and avoid disrupting the Cheal drilling schedule.
Well if he's looking to short a stock trading at enterprise value / operating cash flow of less than 2X, he's come to the right place. Shorts usually look for balance sheet problems. None here. Maybe the increasing reserves and production are a "red flag" for him - LOL. How about the high netbacks (making PTA less vulnerable to a moderate decline in oil prices than many peers)? What a #$%$
I don't have a valuation, but seems like if they focused on doing some joint ventures and finding a few processing customers that would go a long way. Maybe the midstream assets would do better if they were part of a separate company. Mill doesn't seem to have done much to maximize their value. They could spin a % of it off to shareholders while keeping the rest as marketable securities.
They've said they were evaluating joint ventures and allowing 3rd parties to use their processing facilities. If they can accomplish that it would add credibility to the midstream assets. I think they should spin off the midstream assets, but retain a high % of the spinoff initially. No harm in selling 10% or 20% to get the right structure setup. Even though it's not "ripe" yet, a spinoff management team would be totally focused on maximizing the value of those assets and provide a pure play for investors. As the spinoff matures, Mill can divest more of it. They would immediately improve liquidity even by selling a small % of it and keeping the rest on their balance sheet as marketable securities.
The timing of the acquisition seems odd if you look at it as a separate announcement. Maybe it makes more sense if you look at all the announcements as being related. They wanted to do an acquisition and needed more cash for it. They realized they needed to spin off mid-stream assets to get the cash. They brought in a CEO with the connections and experience to do the spin-off.
I think they should setup an MLP, sell 20% of it to establish a public market and a valuation for the assets. As they bring on more third party customers they can sell the rest.
Let's not forget that the pipeline to their production facilities are going in shortly. That adds a lot of credibility to the midstream assets. Bringing in some processing customers and doing some joint ventures would bring more credibility to the midstream assets. That leads Mill with a lot of liquidity to develop their diverse holdings of Alaska leases and production. Build that out for a couple of years and then probably sell that piece also. That's how I read it.
Mill needs to spinoff (I'll call it 150 mil) of midstream assets. I have no doubt that the new CEO with friends at a multi-billion dollar hedge fund (and likely others in that space) can get that deal done. So relative to the deal Mill needs to make, it's big league. Gov Richardson is frequently on TV (thank god for the mute button) and is totally worthless to Mill (judging from the letter by the Board member they fired anyway).