"Full value is a term invented by bankers, and they will generally create whatever value you want to justify a deal and make it legal."
You're clearly overstating your case. Reserves are not determined by bankers....
"Anyway, if things were not so complicated, why hire multiple banks and advisors?"
To get the best possible advice on improving the capital structure.
"At this point, there only two conclusions: The bond holders are out of their minds or they are not."
You neglect to look deeper and examine the selling--appears to be small investors who are not so sophisticated but are easily spooked.
You're right to ask questions--I believe that complacency is dangerous. However, a conspiracy centric mind that wanders off down rabbit holes is also dangerous. JMO, but you seem to veer to the side of suspicion when more obvious and reasonable explanation exists.
Examine the recent corporate presentation. Consider that the Darden family has been running this/predecessor firm for 50 years--they're not without experience, assets, nor options.
Occam's razor says that the truth tend to lie with the simplest explanations.
It's not quite so simple.
Counterparties know that KWK has other assets to draw on.
Too, you've surely noticed a lack of major progress by other ng firms in the British Columbia ng fields. It's been tough for everyone in the ng sector, with many realignments and exits.
The excess supply situation is current while HRB is much further out in 2021/2022.
Asian markets compete with Europe for LNG imports, and HRB/Pacific coast makes greater sense (lower shipping costs) as Asia supplier.
Dealings with related parties is not fraudulent per se so long as transactions are for full value and do not attempt to separate assets from debt.
I don't think anything so complicated is afoot. Examine the August corporate presentation slides available from the IR web pages management which reiterates its strategy.
The tables clearly point out that its Permian and HRB properties are largely off the balance sheet--ie. zero to little proved reserves booked.
These properties are the main levers--drill to determine proved reserves size, book as assets, shareholder equity becomes clearly positive.
Looks to me that the Permian offers potential for quicker relief. Based on strong initial 5 well results, management can better deal with bond holders/banks a scenario of rising oil driven revenue/cash flow to service debt.
Too, the presentation makes clear that KWK's Permian holdings total 100+ acres--is, more beyond those committed to Eni and mystery company JVs. The additional acreage may offer monetization opportunities and deleveraging.
Bonds contain lots of covenants, including those concerning asset sales?
Too, self dealing by insiders (common control entities), especially for less than fair value, will be legally problematic.
1. Drop in ng price. EPS will swing with ng price swings.
2. Too, microcaps such as EPS with limited trading volume will always be more volatile than larger peers or the general market.
If I'm not mistaken, the 7500 mystery partner deal gives KWK a 25% working interest. So, seems more like a revenue flow scenario rather than sale----though there is the possibility of the partner buying out the remaining 25%.
Other players already know of the drilling in the 7500 acres.
How and why does the driller's identity matter to competitors?
And, competitive bidding--isn't that to KWK's advantage? Why would it structure a single party agreement?
I don't argue the potential of the Permian acreage (see the WSJ that I referenced yesterday).
However, Eni only paid ~ $1000/acre for its JV with KWK in the Permian (~$52MM value of drilling costs and ~52k acres).
Eni certainly received a sweetheart deal. Let's hope that they reciprocate once they're convinced by drilling results of the substantial reserves present.
You're a good man--please rethink the Elio if you're planning to take it beyond your neighborhood.
Me---I'd prefer to have lots more steel wrapped around me in the event of a collision.
You're right that shipping/delivery commitments are secured as part of capex planning.
This article in yesterday's SA will be of interest, has a table of major projects and delivery contracts signed: "A Discontinuity That's Not In The Market."
Most projects are fully subscribed.
I said 3-6 months, not days.
The short term movement will likely be driven by recovering ng prices and Permian drilling results.
The longer term movement will be driven by strategic developments--continued Permian development, certainly tangible HRB deal progress and/or announcement.
Once silver lining in the dark clouds---the decline in competition in the domestic ng producers sector through realignments and bankruptcies.
Classic economic supply/demand, boom/bust principles at work, with an ending that will be very favorable to survivors such as KWK.
The HRB is an extremely complex deal to assemble and execute. Most shareholders don't understand, and are frustrated by the delays.
You're right that the Dardens are willing to wait for the best/right deal which maximizes enterprise value.
In a counter-intuitive way, the delays in executing a deal may be positive as it indicates some strength in the hand that management is playing--with counterparties as well as creditors.
"I certainly like our chances we will be back above 2-3 per share at some point in the next 12-24 months."
Hmmmmm, sounds overly cautious.
I'm inclined to believe in a recovery within a 3-6 month time-frame.
The Darden family has a very successful, long term (50+ years) track record, these past 2-3 years and share price notwithstanding. They've been through and survived previous boom/bust cycles in the oil/ng patch.
The HRB project--yes, this is their baby and potential grand slam to hang their hats on, they're determined to make it work.