This specific enough? Just one guys opinion (in Barron's). Piper Jaffray’s Jagadish Iyer reiterates an Overweight rating on the stock, writing that there is no real new capacity that will be added, and that “rational supply still remains the focus of memory players:
We believe that while Hynix has not officially confirmed or denied the news out this morning, publicly they do acknowledge that there is no new net capacity being added. We believe the M10 capacity of 125k wafers/month could be moved from an older facility into a new state of the art facility that Hynix could be planning to build and potentially some of the M10 capacity could be used for other products and/or R&D and would be phased in over time.
yup. 1 for 5 in 2010. that was soon after they closed the awesome scoop form Mitsui right. And also 20% lower than today's low. I am watching and like what I see, with a few exceptions. Some misguided decisions, notable with the UD of course, and give themselves more shares than I like, but still good asset value rel to EV.
for a guy who sold at $4, you seem to be awfully aggressive regarding how uninformed you think everyone else to be...
from 10/30 call(referencing Heron & Merlin): ....you're going from a 12-pound environment to 17-pound environment over a very short interval. You've got to get your case in points right. You've got to get good seats. And sometimes at a matter of 1/10 of a pound. In our case at Merlin, the well kept trying to flow on us.
Will wait to hear, but that doesn't necessarily sound like a dry hole to me. I expect we'll know soon, based on the aforementioned expected 45 day time table.
this chart will keep you busy, that's for sure. makes for an interesting trading position. Algos must love it. The whole sector really.
Let me start by saying I like talking about/debating pros & cons of stuff like this. Encourages critical thinking. So then here's your 5 yr homework. if they do a full conversion in 2018 for about $40, then use $50 (40 + 10 in interest saved over the 5 yrs) stock price as break-even relative to issuing debt, all else being equal (which of course, it isn't.) If stock price less than that, then COC cheaper than a bond, if stock price more than that, then COC more expensive than a bond.
Personally, I'm happier with a 3% convert now than an 8% bond. I want that excess capital going to production, reserve builds & buybacks now, given the IRRs. If stock price gets to $50 I'm happy either way (btw so is EXXI, since they are buying $100mm of shares as this offering closes ~ aka +$82mm gain if stock hits $50.)
p.s. if you believe "that those buying the bonds know a lot more about the company than any of us" then you by definition must believe that they also think EXXI is a good investment, because why would a smart convert investor knowingly purchase a more risky asset if they think the stock price would be
roughly "saves" them about $17mm a yr for the next 5 yrs in interest payments they would have had to make if it was a bond offering. I am betting that $17mm is better spent on putting holes in Main Pass, West Delta, Vermillion and Malaysia... ;)
ran out of space. I am also assuming the convert is purchased by long holders of the convert, not say, an arbitrage hedge fund who would have a much different mandate and return targets, would prob short stock against it, use options, use leverage etc etc etc.
Hey there Real. I don't exactly know the cost of capital yet. No one does i suppose. too many variables. What I do know is that, say debt cost of capital to exxi is 8%. Convert carries 3%. so there is 5% convert holders are giving up in potential coupon on the hope they get that & potentially more on a conversion. a $40 conversion in what, 5 yrs? so from stock price at issue of $27.5 (i'm rounding everything here) you have another $12.5 to go before a straight b/e conversion. then add in the 5% a yr they are trading for stock upside, and you get (again, rounding & no compounding, FV or NPV calcs etc,) another lets say $7 in stock price on top of the $40 to get the convert holders on par with having purchased a bond instead. so convert buyers are betting on a $47 share price in 5 yrs to get them to where they want to be. Now assume they are taking on more risk buying a convert vs a bond, say another 150bps a yr to compensate for that, you are looking at a $49 share price where they get duly compensated for the risk. So stock growth of $4.25/yr, aka mid to low teens % growth as a base case for them. And if the studies you reference actually come true, that cost of capital is higher than that, I welcome it because that would equate to a higher stock price.(not to mention they can redeem some in cash supposedly) On the use of proceeds- i assume this:1) a purchase of $100mm in stock from the LOC (at about $27.50) which seems to be available by the fact that they have a convert issue hitting, is a great purchase in the above scenario, and 2) exxi can turn that excess capital into 1+x in proved reserves and additional production. So I like the deal, and that they are less burdened with interest payments over the next 5 years as they are growing production, reserves, adding rigs and adding leases. Now, if they fail on all accounts, well, they only have to pay 3%. I'm sure there is more than one way to skin this cat. All just my humble opinion.
Haha....Mr Market. Is that the same guy who had TSLA at $190? Dubious resume.
I'm here for oil. Merlin on deck.
and the gravy: Concurrently with the offering, one of the Company's wholly owned subsidiaries intends to repurchase 2,776,200 shares of the Company's common stock at a price of $27.39 per share, funded with $76,040,118 borrowings under the revolving credit facility of Energy XXI Gulf Coast, Inc. , the Company's wholly owned subsidiary.
not to mention, they don't have to convert with stock. can just retire with cash if the stock price is 45, 50, 55 etc. making it potentially even cheaper $. structured well imo.
Have to disagree. Seems like a decent convert deal. $40+ strike for conversion & a 3% rate for 5 yrs? Good way to get capital today, and they can certainly beat that rate on their reserve growth per $ spent.
I have a similar view on it - my take is Malaysia is a much higher hurdle to do a deal vs GOM shelf. So when I see them actually do one, I expect it will be a gem. You don't go that far from home to do an incrementally positive deal do you? you go for a triple or homer.
agree that's a risk, but it's a risk all over the oil patch, and given that GOM pricing is better than shale in most if not all cases, especially inshore where there is plenty of pipe, etc. vs say Bakken where rail has to deliver the majority, I would expect to see shale rigs drop faster then GOM rigs. Oil vs gas cut has an impact as well. But all things being equal, lower oil prices would be incrementally negative.