what they have done is similar to an unemployed person extracting equity from their home for cash to survive. If they burn through the cash and haven't yet found a job they are jobless, have no equity, and probably bankrupt. These survival debt deals never end well for shareholders...it's worse than dilution in that it puts another creditor in front of their claim to company assets. They have taken your equity as a shareholder and pledged it to a bunch of Wall Street crooks so it is the beginning of the end.
If you think a company with 2/3 of its market cap in cash is going BK anytime soon then you deserve to lose just out of stupidity.
Has almost 2/3 of it's market value in cash, and is now cash flow positive. Crazy valuation….saw a price target today of $6. I'd love to see the math behind that calculation.
The valuation on this company is ridiculous…current share price is less than the combined cash balance and value of patents. Net of cash share value around $3.50 makes no sense at all.
WLL was foolish not use their inflated stock value to purchase KOG rather than debt. Now with the shock to oil prices, they see a threat to their existence, which should concern long term holders. Any shareholder that is in this for the long-term should like this move despite the dilution. Debt puts companies out of business…shareholders of companies that go out of business usually get left holding the bag. If this company didn't do something there were going to be a bunch of bag holders…still might be bag holders but at least this buys them time for an oil correction.
Depends on how much they have to borrow in order to stay afloat. If they tap the $500 million that they are now allowed to borrow per the 10-K, and oil prices don't snap back quickly, I see the stock being worth about as much as the paper it's printed on.
I thought they had worked out an amendment with lenders on the covenants until June 30? Based on their 10-K, they are now allowed to issue up to $500 million of junior debt, so that seems like the next move…get some loan shark financing to see if they can ride out oil prices. I sure don't like that cash burn…as of 2/15 they had only $52 million in cash left and also borrowed I think $100 million on the line. So look for some loan shark deal anytime now.
I typically ship 4-5 packages to customers each week via UPS. Recently I have noticed that on about 2 out of 3 packages, they have "audited" the dimensions and assessed an extra charge. I use pre-measured shipping boxes. I sent a package recently in a 22x16x12 box and the bill came back with an "audited" dimension of 23x16x13. The extra charge was $2.46. Multiply this times the millions of packages they are "auditing" every year and this seems like a big scam. I guess if you need to hit earnings targets, when all else fails just screw your customers.
Won't there likely be impairment charges that will drastically reduce book value? I see book value as irrelevant…what matters here is whether they generate enough cash to meet all operating expenses and interest obligations without #$%$ through what they already have in the coffers.
I agree and will take it a step further. Any company that pays a dividend should be current with its trade vendors. I do business with automotive companies that line the pockets of management with billions of dollars per year in dividends, but magically they are too cash poor to stay within generous Net 60 payment terms.
The problem with dividends is that a large percentage of dividends are paid to the very insiders and institutions who are charged with determining whether the dividend is an appropriate expenditure versus the other options you listed.
Sorry tool you just can't file a petition to shed debt and eliminate shareholders without proof of a clear cut need to do so…such as lack of liquidity and access to capital.
Well since you seem to be the resident know-it-all, in your so omnipotent opinion, what impending event causes SD to file bankruptcy?
Then when their hedges expire and they are subject to the market price, they should cease all drilling, store some oil for immediate cash flow when prices recover, lay off all non-essential admin, sell assets to service or pay off debt, and ride it out until prices recover.
By virtue of the fact that there exists a cartel that can manipulate oil prices at will, and most of the cartel members have far lower production costs than non-cartel members, there is no free market as it pertains to oil.
All IMO - but I suffered through this before.
1. Load up on debt when asset prices are high and drilling is profitable
2. Commodity prices tumble leading to asset impairments - book value tumbles
3. Asset impairments lead to debt covenant violations
4. Maybe a deal with vultures to delay the inevitable, maybe straight to BK
5. Stock wiped out
6. Debt holders end up with assets
7. Management gets to keep their jobs as a "thank you" from debt holders
It's not the debt service that will cause major problems, it will be the hit to book value taken when unprofitable fields are written down (impaired). Whether or not it is resolved will depend on how hard of a stance the debt holders take, how soon commodity prices are forecasted to rise, and/or SD can convince deeper pockets to scoop them up prior to #4-6 occur.