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Cubic Corporation Message Board

realinvestmentstrategies 56 posts  |  Last Activity: May 22, 2015 9:58 PM Member since: Feb 27, 2002
  • realinvestmentstrategies by realinvestmentstrategies Apr 6, 2015 10:14 AM Flag

    My negativity regarding EOX comes from the consequences they get from the $480 million of additions in property made by the company last year, of which more than $300 million was supported by debt and accounts payable increases. It brought the total book value to properties at $620 million.

    Those properties are no longer worth $480 million. The ceiling test will require write-offs using a 12 month trailing average for the price of oil. The Q1 write-off will be brutal, probably over $100 million. It looks like Q2 is also going to be more brutal. While we can't know for sure how long oil stays at $50, if it stays all of 2015, the write-off to Emerald could be as high $500 million.

    While you refer to these entries as non-cash, it will cause a negative net worth situation. The availability of the revolver will be cut. It might lead to stock de-listing. It will create all sorts of problems.

    The one positive is that the share price is already so low, that this news might already be baked into its value. Certainly, a surprise uptick in oil prices would help Emerald share price.

  • Reply to

    they should sell all non operated acrage

    by jimjones62 Apr 3, 2015 2:24 AM
    realinvestmentstrategies realinvestmentstrategies Apr 5, 2015 10:31 PM Flag

    Jones, I have two business degrees and forty years of stock trading, not to mention that much actual business experience. So yes I know what I am talking about. The paper losses will be real if oil doesn't go back up and any lender will apply that standard.

  • Reply to

    they should sell all non operated acrage

    by jimjones62 Apr 3, 2015 2:24 AM
    realinvestmentstrategies realinvestmentstrategies Apr 4, 2015 3:51 PM Flag

    The convertible notes do not have loan covenants and are not due until 2019. The $100 million credit revolver is another issue.

    Also if the properties aren't worth what is shown on the books, they could be written down to a level that is below net worth of the company. A $300-500 million write-off is possible over the next year.

  • Reply to

    they should sell all non operated acrage

    by jimjones62 Apr 3, 2015 2:24 AM
    realinvestmentstrategies realinvestmentstrategies Apr 4, 2015 12:56 PM Flag

    As if there is a market for that kind of property today. The lenders are shrinking the amount they will lend due to the fact that these properties aren't worth very much today.

  • realinvestmentstrategies by realinvestmentstrategies Apr 1, 2015 2:13 PM Flag

    At a dollar fifty per share, the market cap comes out to $81 million. But there is $73 million of cash & equivalents on hand.

    I guess the street did not like the answer to that question in the investor presentation, when some one asked if the cash might be used to buy back some shares.

  • Reply to

    Back into AREX @ 6.2441....

    by keltus1952 Mar 31, 2015 11:31 AM
    realinvestmentstrategies realinvestmentstrategies Apr 1, 2015 8:27 AM Flag

    Once we've had two or three quarters of property impairments, the book value could be less than zero per share.

  • Reply to

    Back into AREX @ 6.2441....

    by keltus1952 Mar 31, 2015 11:31 AM
    realinvestmentstrategies realinvestmentstrategies Mar 31, 2015 9:25 PM Flag

    ---t's called a "ceiling test" and they are usually done in the 4th quarter results every year---

    Wrong, it's done every quarter.

  • Reply to

    Back into AREX @ 6.2441....

    by keltus1952 Mar 31, 2015 11:31 AM
    realinvestmentstrategies realinvestmentstrategies Mar 31, 2015 8:37 PM Flag

    Here are some snipits from the 10-K that will show you how impaired I am....

    -Accounting rules require that we periodically review the carrying value of our properties for possible impairment. Based on prevailing commodity prices and specific market factors and circumstances at the time of impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying value of our properties. A write-down is a non-cash charge to earnings. We may incur impairment charges in the future, which could have a material adverse effect

    15
    ________________________________________
    on our results of operations for the periods in which such charges are taken. The risk that we will be required to write down the carrying value of our properties increases when oil and gas prices are low or volatile.
    In addition, current SEC rules require that proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years, unless specific circumstances justify a longer time. This rule may limit our potential to book additional proved undeveloped reserves as we pursue our development projects. Moreover, we may be required to write down our proved undeveloped reserves if we do not drill those wells within the required timeframe. For example, for the year ended December 31, 2014, we reclassified 5.8 MMBoe of proved undeveloped reserves as probable undeveloped. These reserves were attributable to vertical Canyon locations in Project Pangea. We postponed development of these deeper locations beyond five years from initial booking to integrate their development with the shallower Clearfork and Wolfcamp target zones.

    If oil, NGL and gas prices decline by 10% from $94.56 per Bbl of oil, $31.50 per Bbl of NGLs and $4.55 per MMBtu of gas, to $85.10 per Bbl of oil, $28.35 per Bbl of NGLs and $4.10 per MMBtu of gas, then our PV-10 as of December 31, 2014, would decrease

  • Reply to

    Back into AREX @ 6.2441....

    by keltus1952 Mar 31, 2015 11:31 AM
    realinvestmentstrategies realinvestmentstrategies Mar 31, 2015 12:03 PM Flag

    The problem with the balance sheet is that it is about to change. IMO unless they do a capital raise, all the net worth will be wiped out due to impairments by Q2.

  • The write-offs could be huge.

  • Reply to

    PROFITABILITY not a concern for EOX

    by wifewantz1stladyluv Mar 24, 2015 11:38 AM
    realinvestmentstrategies realinvestmentstrategies Mar 26, 2015 12:53 PM Flag

    If they could survive a couple disastrous quarters of write-offs, it might come out to EOX's advantage in the long run.

    Write-offs mean reducing the value of the assets. But going forward into 2016 there would be a much lower depletion cost that might make operating profits more feasible. The way Wall Street works, they would much rather see a company take $200 million in charges one year, then earn $25 million for each of the next two years as opposed to losing $50 million three consecutive years.

  • realinvestmentstrategies by realinvestmentstrategies Mar 26, 2015 11:15 AM Flag

    That's down from $61 million in 2013. BOE for the Texas properties also declined from 1,270,000 in 2013 to 671,000 in 2014.

    Apparently the investor presentations showing potential PV-10 of $140-280 million for these properties didn't get realized.

  • realinvestmentstrategies by realinvestmentstrategies Mar 25, 2015 11:27 PM Flag

    He has definitely disappeared.

  • Reply to

    PROFITABILITY not a concern for EOX

    by wifewantz1stladyluv Mar 24, 2015 11:38 AM
    realinvestmentstrategies realinvestmentstrategies Mar 25, 2015 7:30 PM Flag

    There will be no profit in Q1. The write-off could exceed $100 million.

  • Reply to

    If WLL needs to raise capital....

    by realinvestmentstrategies Mar 23, 2015 8:05 PM
    realinvestmentstrategies realinvestmentstrategies Mar 24, 2015 11:21 PM Flag

    The dilemma comes when the impairments start, Q1 2015.

  • realinvestmentstrategies by realinvestmentstrategies Mar 23, 2015 8:12 PM Flag

    In order to be in position to avoid non-consent penalties and to make opportunistic investments in new assets, we will continue to evaluate various options to obtain additional capital, including borrowings under our Credit Facility, sales of one or more producing or non-producing oil and gas assets and/or the issuance of equity.......from page 15 of the 10-K

  • realinvestmentstrategies by realinvestmentstrategies Mar 23, 2015 8:05 PM Flag

    You'd better believe AREX needs more capital.

  • Reply to

    Dilution not my biggest concern here

    by sa94me10yrs Mar 23, 2015 6:41 PM
    realinvestmentstrategies realinvestmentstrategies Mar 23, 2015 7:58 PM Flag

    Impairments are a huge problem, because they cause violations of debt covenants. The resolution will be making WLL pay back a large part of that debt.

  • Reply to

    Dilution not my biggest concern here

    by sa94me10yrs Mar 23, 2015 6:41 PM
    realinvestmentstrategies realinvestmentstrategies Mar 23, 2015 6:55 PM Flag

    It doesn't stop the property impairments, but probably gives them positive net worth after the write-offs complete.

    There are lots of other companies with similar or worse problems.

  • Reply to

    Did Yahoo discontinue Eox Message board ?

    by benjaminne2004 Mar 21, 2015 1:27 PM
    realinvestmentstrategies realinvestmentstrategies Mar 22, 2015 12:05 PM Flag

    Go to Investor Village.

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