They're betting the whole company on the future of Nexus, yet there've been few specifics regarding what' s been accomplished or where it is going.
It's a regressive tax on consumption aimed at the poor and middle class, but concealed as a tax on oil companies.
$74million cash gets reduced to a market cap of $49 million, because investors feel this business model is worth less than nothing.......$25 million less than nothing.
How's that for creating some shareholder value!
No one knows if or when oil prices will rise. But you can bet ESTE will follow the trend.
Most of the $15 of book value comes from the property assets. Hard to tell what kind of market value they might have today. It is in the Permian Basin, an area that's been more attractive than most, but in a terrible market for oil property.
AREX took its first impairment last quarter and it will undoubtedly take another at year end, thus the $15 bv is going down.
At the present time, AREX has plenty of borrowing available on its revolving credit facility. That credit facility gets re-determined this April, so it's possible there could be a cash crunch.
In the event the collateral gets cutt dramatically, AREX could have a problem. Usually after that, firms have months to go through workout. So while bk is a real risk if oil stays below $40 indefinitely, the company is not going to fold in the next twelve months.
Thus you can take the risk/reward at this price, if oil stays at $40 for two years the shares are probably a complete loss. But there is lots of upside potential depending on how high oil might rebound if sentiment changes.
There is concern that all the cash will be frittered away in two to three years with nothing to show for it.
Lucas has managed through about 18 months of debt covenant violations, without going under. Just goes to show how much solving a little problem can impact today's share prices.
The oil assets have been worth less than the debt for quite a while. The lenders won't put up with this indefinitely.
I emailed you on SA, but see you already found it. Hard to tell how much they paid for the same property, but they are announcing this sale several days after the deal was signed.
The climate change conference in Paris encouraged 500 institutions to sell anything connected to fossil fuels. There might be some programmed selling going on that has nothing to do with economics.
I am a 17 year veteran of Yahoo message boards with tens of thousands of posts. I have reported all this stalking nonsense to Yahoo, obviously he has multiple ids.
Unfortunately Yahoo doesn't enforce its own rules any more has allowed their message boards to deteriorate.
Elain, I'm beginning to think you could be hot. Not that I like the idea of you going for a ladyluv. However the pay 4 kitty sounds appealing.
It seems like a risky guess at this point, Elaine. If the primary lender forecloses within six months, the equity will be gone. IMO, the workout process will go on for more than six months and that would keep the share price alive. But without knowing in particular what that lender plans to do, it's just a gamble.
In the event oil prices made a significant rebound the odds of EOX equity surviving also increases. I doubt $65 by next spring would be enough, but an $80 WTI price might give EOX long term hope, and at considerably more value than $2.
The convertible notes don't come due until 2019. They come in behind the secured lender, but ahead of the equity holder.
The secured line of credit is the item where EOX is out of compliance. Usually they provide some workout time, that's why I think the company stays out of bankruptcy for at least several more months. The secured lender would prefer cash as opposed to seizing EOX property assets.
According to one SA article on USEG, the mineral rights continue with a new owner. It's possible that in bankruptcy, the property might be carved up in such a way that the mine and water treatment plant might be divided, leaving the city with the fear of future moly development. Thus, it might be in the community's best interest to make a deal with a solvent USEG as opposed to a bankruptcy court.
While this article got lots of conversation on the IV board, the information was disclosed in the 10Q report and is old news.
After the large drop in the primary lender's borrowing base and extraordinary large Q3 impairment,why should this be any surprise? EOX equity is finished without a substantial rebound in oil prices, say by next spring. If oil goes back above $65, everything is back on the table.
I suspect there might be another property impairment at year end, but ESTE is in much better shape moneywise than most of its industry peers. I can't believe they can justify drilling new wells with the current level of pricing.