EXCO has 48,000 acres in the Eagle Ford shale as everyone knows. The sleeper part is that this acreage includes the Buda formation. MCF has been drilling this area (Zavala and Dimmit countries) with 6 wells completed (86% success rate) and initial rate 30 average production rate of over 720 boed. This potential probably has not figured into the stock price but should be.
It seems to me that the new regulations the govt wants to put on new trucks will keep older ones around longer. Thus making them prime candidates to convert to dual fuel to reduce costs. That could be the reason APGI is moving up so quickly.
I think the company sells it oil based on Brent which is hanging around $107-$108.
Agreed. I can't believe that the board couldn't find someone to sell to or a turnaround organization to save this company.
What determines the price: quality, logistics, location, supply and demand? I was wondering since it was $20 lower than WTI.
The management was great in moving the company through BK several years ago protecting shareholder value.
The problem I see today is that the management is not developing their resources quick enough.
At almost 13% interest on the main loans they are basically re-buying the properties every 6 years.
I think the management needs to get the CapEx closer to the total value of the properties. My hope would be in the 60-80 million dollar range. The argument against that amount is the no one would loan the much money to them. If true, I would suggest that company start joint ventures, drilling funds, other oil companies, etc to do development deals on one or several wells where the revenue could be split after the drilling costs are reimbursed. This would eventually give them additional cash flow to develop their properties. I know this can be done because I own a couple oil stocks already doing this.
As I stated before the I think the deal was very unfair to the current shareholders. But I high exceptions for the WY leaseholds so I decided that I've give management a chance to see if they can deliver.
yes, all proven and potential reserves. The company formed a LLC (put in all of the LA properties)and sold 34.675% of it to Gulfstar which gave them 6.25 M which the company plans to use for development. In a joint venture, a company would have contributed their % to develop the working interest. If you assumed that was being done with the 6.25 M the company is using (Gulfstar portion 34.675% would be 2.25M). If you subtract that from the 6.25M means Gulfstar obtained the 34.675% working interest for 4M.
Which mean the 100% working interest in the LLC is 11.53M.
In the June Presentation on the website stated the value of properties was those properties was PV-10 90M.
Do you selling 31.3M PV10 (90M*.3475) for 11.53M is fair deal? Remember that 34.675% interest is all ready producing 4.1M in revenue before production costs.
In most joint venture each puts up their % to pay for development. I don't know the total agreement but if Gulfstar declines to contribute. Armada might be able to drill and keep any production but I would be surprised.
I spoke to them several months ago to find out what was going on. Management person said in their search for funding(my words) that one organization wanted funding at 25% interest.
If the company farmed out the drill project in a 50/50 split.(See earlier post) The other party would be responsible for financing of the well because the company provided the reserves. Thus if it fail, it would n't affect the company financially(the driller would fund the loss. ) That is one of the reason small oil companies do joint ventures. It reduce their financial risk.
Plus, I believe that OK was a wildcat thus they were "learning the new territory". LA has many successful completions(producing wells) thus a lot less risky.
I spoke to someone in management and they told me the lenders wanted 25% which he feel was too high. Not knowing, but with some knowledge, that even paying 25% the company rate of return should easily have cover drilling costs. These well should have payback of less than 12 months.
I would not be surprised when they drill they will find additional reserves.
Thank you for your post.
Remember the deal gives Gulfstar 70% of the proven (all) reserves. As I stated before Armada should have been able to get drilling deals with no money up front and at least 50% of the production after drilling costs.
If the reserves are what management stated a 3rd rate deal maker should have gotten a deal better than this.
As I said before the ORRI in WY itself is worth 17Million.
They should have been able to sell an ORRI for the LA reserves to pay for another well.
Check out AMZG financing deal. Although, the dilution was priced to low in my opinion, the company still got a good deal.
As I said before offer the deal to third party independents and see what they think.
Thank you for you reply to my post.
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..