Lots of bank credit? How do you come to that conclusion?
The severe reduction in last year's PV-10 vs year end 2013 came from a drastic cut of proved reserves in the Texas properties, where they went from 1.27 million down to 672 thousand.
There is also the five year rule where USEG disclosed...---Additionally, no proved undeveloped reserves are scheduled for development beyond five years of initial booking.--- in their 10K. I suspect this means development plans in 2013 were moved out several years, therefore some of the BOE could no longer be classified as proved or part of the PV-10.
There also seems to be quite a bit of confusion regarding EUR's in developed Buda wells. The recent investor slides show estimates EUR's of 200-400 mboe, yet all the developed wells have shown rapid decline rates such that it doesn't seem they would get to every get to 100 mboe in cumulative production.
If the moly mine went from an asset to a liability, you might see that 80% write down in one quarter.
However, we might be approaching the end to oil property write-offs. Probably a bad Q2, but more reserves will be established by Q3 and offset the lower price benchmark.
Instead of selling the mine, maybe they should sell the Booth Tortuga lease with all the Buda properties. At least it might have some buyers.
I doubt they could find any buyer for the whole company, oil is so different than the moly mine mess.
I wonder what it might be worth if USEG sold the Buda wells. That whole South Texas property showed a PV-10 of only $23 million at year end.. Could it get more than $23 million?
It wasn't too long ago that USEG had investor slides showing the South Texas properties with a potential PV-10 value of $140 million on single spacing or $280 million with double spacing.
Yet at year end, the PV-10 valuation for these same properties came in at only $23 million, partly due to the decline on oil prices, but also due to dismal production results in the Buda wells once they passed a few months of operation.
It seems there is a wide range of ways to value this property depending on the planned timing for production and long term estimates for oil prices. It might be nice to get more details of this property, at least tell us what they know. The oil is still in the ground, so how much is there?
At some point we may have reached bottom and get a nice rebound. You just need the guts to catch a falling knife.
I've followed that issue with LEI, they've had a second life for almost a year and a half, so it is likely that USEG also would get listing extensions for quite a while.
This might be one of the defining moments that determines USEG share price this year. We already know the company will need more operating funds now that the line of credit has been so badly constrained. This document suggests that there will be more capital without any more than a 1/3 dilution.
So it's a matter of whether the potential share dilution justifies the current level of discounted share price. Survivability beyond the next twelve months might also be a question mark. IMO, the share price could go drastically either way at this point, let's see if we get any better insight after next week's investor conference. The company owes investors some real information.
At this point, Keith Larsen has such a credibility problem, making all those comments about continuing to actively seek accretive acquisitions or saying on a conference call that banking relations are good. When in reality their credit got cut much more in proportion to other companies, they’ve registered for a huge share dilution and they’ve announced that they will violate their loan covenant in Q2, 2015.
If the company really has some misunderstood value, they might use this conference to explain a little more about the mine, the reasons for surprising low production in South Texas, what they can do about the upcoming loan covenant violation, how they will make payroll for the rest of the year, and whether they really intend to dilute existing shareholders by up to 90% as might be possible with the shelf registration. Without that, why should anyone buy the existing shares?
I come up with a bit more than 5.5 million shares, but at any rate, more shares have traded today than are in existence!
The company's book value was over $46/share post/split for the quarter ending March 31, 2015. While there might be some more write-downs, there have already been considerable write-downs in the last few months.
Emerald has enough cash to wait this thing out a couple of years. Their assets will regain their previous market value if oil prices rebound over the same two years. Why not just hold on a bit and let it work out?
There's no need to screw things up for the shareholders just to get a bit more property?
So what was the need to go out buying more junk property, given that it would require a capital raise?
It might be nice to get some respect for the value of existing property.
What if the current shares get diluted by 80-90% once USEG floats its $100 million of new capital?
but not for the good of the existing shareholders.
Doesn't matter whether they drive the existing share price down even more, it's just a balancing matter of the percentage of the company owned by existing equity owners vs those with future shares. The dilutive offering is for $150,000,000, not a fixed number of shares.
Boolean created 2/3's of the posts, so it's not surprising to see the lower response rate.
IMO, the entire E & P sector is focusing on the quality of its assets and the availability of liquidity. Short term earnings reports like today's are meaningless.
ESTE has an incredibly strong balance sheet relatively speaking for this sector. I don't know about the quality of its existing properties. Pay attention to the deals and the price of oil, this company will look quite a bit different in one year.