More than 2.8 million shares were just voted against nearly the entire Board of Directors, who barely survived the November vote. You might have to convince those holders the stock is worth hanging on to. I think some of them may be selling at every opportunity. That's a lot of stock to work through on an average daily volume of about 20,000 shares per day--even if only half of that volume is disgruntled stock trying to find an exit. This could be buried for a while longer. However, I would not rule out a coup/proxy fight to force sale of the company or removal of Board members. The votes are there to accomplish it without a lot of effort or arm-twisting of the non-voting shares from the November meeting. Stay tuned, you may not have to wait 3-5 years. Every down day will bring even more pressure to bear on both management and the Board, and more motivation to those who want to see a change made.
But the public market is only one way to value a company, and often it is not fair value. The company execs can take it private, lever up, and then run it out of the public arena and distribute the free cash flow to themselves proportionately. They can sell the company to a PE firm, larger industry player, or even a private individual given the small dollar amount involved. What you don't want to do is sit w/illiquid stock at 70 years old w/no where to go in a forced sale to deal w/legacy concerns. Of course, everyone thinks they will live forever.
Almost 3 million shares in the hands of dissatisfied investors based on that shareholder vote. That could weigh on the stock for 12-18 months. Not an easy security to get out of in the open market.
Awilco can easily pay the near the current dividend amount for the next four quarters. Whether they should is the question. I think Tom Petrie is right that unlike the last decline in oil price w/the financial collapse of 2008, this decline will last a lot longer. The Saudi's clear intent is to permanently break the back of the N.A. frackers. That will take at least two years, because many of those fracking producers have hedges in place to protect them from a severe oil price drop for 2015, and many won't even face financial jeopardy until well into 2016. Two years is also the time frame for how long a general populace will accept austerity (in Saudi Arabia), or more aptly, relative austerity as they live pretty well otherwise. Witness Greece as the analog. The populace will grit their teeth for about two years, but then you hit the breaking point where something gives. It's a game of chicken as to who blinks first, the Saudi monarchy or the Fracking companies, and it will get intense by early 2017. I think most shareholders in Awilco could live w/a 50% dividend cut to nearly $2.00 per share annually for 2-3 years. That would be what I would suggest.
Jim Cramer, while not outright dismissing it, seemed to think the forecasts of oil at $14/bbl. were not likely as "everyone would go bust". So that's something. $26-$28/bbl. seems like a more reasonable bottom IMO. Too many people are looking for oil price to hold the double bottom at $33/bbl., and markets are prone to excess, so capitulation in the mid-to-high $20s makes some sense. Too late to sell, but too early to buy in this sector. They won't ring a bell at the bottom, but the knife is still falling.
Press release contained the "V-word". The single most important word for this company given the last two years. You know the word to which I am referring.
Not sure I'd want them to have the Helix technology. The Chinese have institutions dedicated to teaching and using reverse engineering to steal technology. It's kind of their forte. Ain't going to be any patent protection in China. Wasn't it about this same exact time last year that PRCP announced a big European contract w/a premium German auto manufacturer that popped the stock $5 or so per share, only to lose all the gain and then even more when installation delays made it a moot point. The best laid plans..... From the volume today, although the share price is higher, no one is really buying this news w/size purchases of stock. Once burned.... the company will probably have to deliver actual bottom line earnings for a few quarters before credibility is earned. I'm from Missouri on the news.
The discussion has probably shifted from what the two injection wells will contribute to overall earnings----to how much it will cost the company to shut them in. The Saudis are adamant about dismantling U.S. fracking permanently, no matter how low an oil price or how long it takes. Demand for oil futures in the $20s/bbl. is really accelerating. That price should accomplish the Saudi's goals. $40 is obviously not going to hold and everyone is targeting a double bottom at $33 per barrel, but markets are prone to excess and the price will overshoot that to the downside in all likelihood. But the stock price already has discounted all of that with the company selling at nearly 20% or so of Book Value. Golf courses and a hotel and related facilities have to be worth something as does net cash on the balance sheet. It's not like the company is riddled w/intangible assets. Hard to overturn downside momentum w/a fundamental analysis or breakup value analysis though. The stock probably continues to work lower to force that hand of Mr. Klingle and the Board. I would have offered to take it private already if i was him.
Kilduff is targeting $33 per barrel, I think Gartman is in the same range, but Stephen Schork says he will only feel comfortable saying a bottom is in when it hits $0. Obviously he is being hyperbolic, but you should note that oil futures in the $20s range have been seeing a real big pickup in interest recently. It could be hedging, or a speculative bet on an Armageddon scenario of widespread oil exporter defaults (Russia,Libya, Iran, Iraq, Venezuela, Indonesia). Canada, Brazil and Mexico will also face mucho pain. Hard to tell if any hedge fund is in trouble yet, but if someone has a heavy bet on Russian investments, foreign currency, or energy it could be hand-wringing time. This is the black swan as energy reverberates through everything (bank loans, sovereign funds, hedge funds, retirement accounts, and geopolitical balances of power). Gradual declines of the same dollar magnitude can be dealt with, shocks are a different story.
Depends on your time frame and where you bought. Those that bought at $26.43 a few months ago might argue as to whether a drop to $10 constitutes holding up. Separately, I think some major shorters may be targeting large hedge funds that have significant long positions in energy stocks and that employ leverage. The bet is that the hedges will have to unwind the long if they can create enough pressure or a "run the the stock" , an unwind forced by either excessive leverage held by the hedge fund or mandatory redemption calls by fund holders due to poor performance. While the short raid is played out on stocks like SD and NADL, there is still plenty of room in hedge favorites like RIG, SDRL, DO, etc.
Apparently cash is no longer worth 100 pennies on the dollar. Not when the executive officers do nothing to enhance shareholder value and use the company simply to collect the annual paycheck. It's an annuity to them. Shareholders are an after thought, a byproduct, not really a consideration. Run like a private enterprise w/all the perks of being a public company. Been that way for years. Will continue to be that way for years. So cash on the books is like worth 80-90 cents on the dollar, no more. It's not undiscovered. It's trading at fair value and the market has it right given the Rip Van Winkle nature of executive management.
That said, w/all the recent insider buying, I'm not sure I'd let the tax (loss) tail wag the dog here. I'd be a little nervous having to sit for 31 days to avoid the wash rule before getting back in. One big contract changes everything, and if it doesn't happen, they have already said they can size to the market--which protects the downside a bit.
in a very illiquid security that no one will touch. Time to think about an exit strategy or just leave the headache to his heirs who may or may not know what to do w/such an investment. The public market is not going to bail him out or offer any liquidity in which to offer stock for sale. It's more than a tax loss selling issue, and time to think outside the box.
The company went through a significant amount of cash and incurred some debt to build those two wells (luckily partly financed by an LP) and buy the hotel property. They did it in a way so that the Balance Sheet is still liquid and they have a fair amount of cushion. But at some point you have to stop digging and throwing good shareholder money after bad. Neither operation is providing a return to shareholders. It's a breakeven company that generates a small amount of positive cash flow. Yawn.
The bloom is off the rose on that part of the story for sure. You can still own it if you believe in golf. But the money may be better spent just buying yourself a new set of clubs because the story here may be only function of value based on break-up analysis. Don't know if anyone would want the wells. Better shot at selling the hotel and golf courses at some discount on the dollar. Stock could be worth a dollar or so more than current market value. Doubt the CEO will fold his cards though. It's hard to give up being the CEO or Chairman of something, even if it's not worth much.
You don't see this too often w/a company that is still clearly solvent and at least marginally profitable. Feels like a forced liquidation is occurring. Could be anything really---tax loss selling, margin, panic, or just wanting to finally get a good night's rest w/o worry.
Mom and pop investors getting ripped on price ,100 shares at a time, to take their tax loss. At some point you do anything just to end the nightmare I suppose. The company sure ins't going to help you out. There is no share buyback in place to help.