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Maverick - entertaining, if not informative
Long history there. years of jawboning everyone with his great wisdom.
Entertainment, of a sort. Did generate some traffic on the boards.
So its your turn now, Crapola? Go for it!
Conversation on oil price drop
In a recent conversation on the impacts of the drop in oil prices JW openly shared some thoughts that generally followed what I expected. He wasn't particularly worried, in the he didn't feel DBRM was over leveraged, and this is cyclical - he's seen it happen quite a few times. So, yes, profits get hit. But recent production increases from the new wells still generates oil, and the big drilling and connections expenses have already been incurred. Slow down or stop drilling for the moment (depending on various factors). Sales income goes down. So do many expenses from all the vendors and suppliers due to drop in demand. Production costs for DBRM are pretty low.
Selling shares - Not "insider" selling
I asked, and was answered, that the last few months of share sales are not being run by any official "insiders" and not by any of the major business partners, since the terms of the loans and other contracts require notification. Company doesn't know who it is, but does know who it isn't.
Repurchase - more details,
Nolly - I don't know any great details on the repurchase, but from what I've seen and read on the original and updated loan agreement it may well be a good deal in a number of ways. I'll try an call CEO Westmoreland next week and chat. He's very open to calls.
Anyway, not sure if you knew the background. DBRM got a loan from Maxmillian, which included various rights for stock, etc. The repurchase ends up cashing out the stock, which lowers total shares outstanding, as well as changes the terms of the loan by reducing the interest rate, etc. Looking at the big picture this can be very helpful. Max trades shares that may have higher future value for current cash. DBRM gets remainder of loan at lower rates and other benefits. If they are at, or very close, to breaking even and still have enough cash for the new wells, then cashing out the loan can make good sense.
Below is another more details item on the repurchase.
Daybreak Oil and Gas, Inc. Enters into First Amendment to Amended and Restated Loan Repurchase Agreement with Maximilian Resources LLC
Aug 27 14
On August 21, 2014, Daybreak Oil and Gas, Inc. entered into a first amendment to amended and restated loan repurchase agreement with Maximilian Resources LLC under its amended and restated loan and security agreement dated as of August 28, 2013. Pursuant to the amendment, the lender agreed to make a loan to the company under the loan agreement in the amount of $2,200,000 (the additional advance). The lender also agreed to temporarily decrease the monthly payment made by the company pursuant to the loan agreement to 3% of the outstanding principal balance of the loan until the savings to the company from the decrease in monthly payments total $1,000,000. The additional advance, combined with the $1,000,000 in monthly payment decreases, will be used by the company to drill up to four additional wells on its twin bottom fields acreage in Kentucky and to loan funds to its Kentucky drilling partner, App Energy, LLC, for its portion of the anticipated four additional wells. Furthermore, the lender agreed to amend the loan agreement to decrease the interest rate applicable to the loans under the loan agreement from 12% per annum to 9% per annum, with the monthly commitment fee of 0.5% per month of the outstanding principal balance of the loans remaining unchanged. The lender also agreed to decrease the default interest rate by 3%. The amendment also amended the loan agreement to reflect the prior termination of the deposit account control agreements by agreement of the parties. Advances made by lender under the amended and restated loan and security agreement dated as of August 28, 2013 (the loan agreement) had already exceeded the lender's minimum commitment.
Revenue vs costs is all about how you measure costs
That's why you never, ever, negotiate a hollywood contract for a share of profits. There never are any, no matter how much the movie grosses. Amazing how that works....
?? Today's seller mentality ??
I don't get it. Dramatic progress in the annual report, and that was essentially without the KY wells at all. So why would someone sell now, versus perhaps a couple months ago, for a price below 30? And why would they possibly sell for as low as 22?
Perhaps they got just got stuck with an immediate need for hard cash, and if they bought at 10 they do have a nice profit. Still... boggles the mind.
contract terms
Can't say that I've actually read the contract, and without that would not want to really judge just what any restrictions there are on Daybreak in regard to obtaining leases on new property. There are lots of ways of wording limitations, including considerations such as geographic, timeframe, funding source(s), etc. I really don't think JW would have signed a deal that forces Daybreak to pay 50% to Max for anything and everything in KY regardless of time, location and whose money they are using. If, on the otherhand, it is treated like a line of credit and they draw from that for the lease, then that may well a clause that applies.
We're also waiting to see what full production really looks like as well. The earlier KY wells only had local storage for each well, and the trucks had to drive to each, shut off the well temporarily, empty the tank, turn well back on, and off to the next well. One of the major efforts late last year and into this one was to complete a central storage facility beside the main road and run lines from the well tanks to the central site. Then the wells can run continuously and the trucks don't have to wander about. All that should increase per-well output. And that should be reflected in the annual report coming out in the next couple of days.
Of course another major item is just seeing if they are finally cash flow positive for operations, or just how close they have gotten. That's major milestone.
So.. why the drop?
No bad news. Consistent general good news. Low volume isn't surprising given the visibility of DBRM, but that doesn't really explain the drop. Just normal "someone out there needs to sell" or something more? Even that doesn't well explain why the price isn't more stable.
Thoughts, folks?
Hawk as literary symbolism?
Maybe the hawk is literary symbolism, like my HS literature teachers taught us. The "little birdie" is little news, and the "big hawk" is really big news.
Or maybe it was just God's good creation having fun. Or inebriating spirits.
No Mav, the point is...
You seem to be expecting that they should be doing a specific thing - but something which can't really be done the way, or as easily, as you seem to claim it can.
Don't blame them for not doing something that, at least as far as I understand it (a) they are not allowed to do and (b) doesn't work the way that you seem to claim it does.
JW and Ed are responsible for promoting the company. They're not off the hook. I agree that JW needs to continue to improve in that area. But your proposed solution has a number of faulty presumptions.
Mav, exactly how does one "manage" and "court" MMs?
Curious here, since you make it sound so easy.
What, exactly, would you do that DBRM isnt, that would draw their attention, and not get in trouble with the SEC rules and restrictions?
More a question to Mav about MMs
I'd assume that Ed Capko could provide some insight, and I've chatted with both Ed and JW in the past. But I guess my question is more to Mav about courting MMs, since he's the one that's promoting it. Not sure how you'd do it, or how productive it really could be, given what little I know of the SEC rules and the business model of MMs. So Mav, presuming your reading, any thoughts?
Q on MMs and "penny stocks" price & volume
Hey guys & gals. Any idea how you would actually go about arranging a roadshow with MMs? Maybe I'm just not that familiar with their ops. I understand a roadshow for hedge funds and such that might make direct investments by buying stock. And I'm rather familiar with general publicity, press releases, etc. But how would a roadshow to MMs actually work, and given the price and share volume of the stock, and the biz model for MMs, how valuable do you think that would really be to them or to DBRM?
1 share at 0.37?
Did I really see that go by? Some things in life are just really odd. Can't help but wonder what the rationale was for that transaction. Or maybe I just imagined it...
I believe so.
Birdman and Maverick often post very good analysis, so I recommend catching up on the notes about the company. Their other posts about their parties, and Mavericks about most any odd topic are generally entertaining, at least.
I think I might well be one of the folks that have tracked Daybreak the longest - back before they even had their California property, and were still working down south. Picked up a little then, watched it drop over time (disappointing), but did like what the CEO was trying to do, and how he was trying to do it. CEO James Westmoreland is great on operations and financing, rather weak on marketing and publicity. He'll talk to anyone that calls, and I've chatted with him many times over the years. After they picked up the California properties and things stabilized a bit I started picking up more shares. Company had a pretty good plan, but was cash poor - but didn't dilute to get funding. So I picked up more. They finally have gotten to the point that they don't need much outside money and can/should be able to grow well with the revenues from current properties. All that said I've got a tidy pot at average price well below current share cost and I'm not inclined to sell any of it.
Very minimal dilution
jjwood- the good news about DBRM is that while they have been going a bit slower than we would all like. I've been accumulating for quite a few years now, and do wish there was a bit more PR and such - but I can say that James Westmoreland (CEO) has done it efficiently, responsibly, and with absolutely minimal dilution. There haven't been any pipes or other major stock actions in a long, long time. The funds for additional drilling have been obtained through loans - though some do have some non-cash terms related to revenues from some properties, and some stock, etc. They are now right on the edge of break even for operations. Might be there now, or 1Q next year, depending on production numbers. That finally frees them to use income for new land and wells, rather than outside funds. Some of the recent good news from KY and CA also allowed them to renegotiate a loan, getting lower interest, etc. Check out the various older news releases.
Good not-news?
I had a good general conversation with Eddie Capko late last week. Generally all is going well, at least in general. As per press release, 2 of 3 recent CA wells are a hit. The press releases are, as usual, very low-key and have almost neutral sounding titles. Jim doesn't promote, he informs. I'd like him to promote a bit more, but not overly so and not misrepresent, either. He's certainly stronger on operations than he is on marketing. So... we should hear more soon, but I didn't hear anything I shouldn't hear, which is appropriate.
Then again, Eddie's thinking and sharing that the stock is undervalued is his opinion, and does not constitute an inappropriate forward-looking statement.
Number of wells.. moving target
As I count it, there are 14 wells in production in the East Slopes project in Calif, 7 of which were new (May and June) and which I think are now at full flow rate.
Separately, there are 3 wells now drilled and declared successful in Ky, though not are all in production yet.
4 additional wells are scheduled to drill in CA this fall, some underway, and I believe 3 more in KY by end of November.
BTW - welcome to all ya'll newcomers.
It's been a few years of slower that we all would like, but CEO Westmoreland has done a good job, avoided unneeded dilution, made sure all is done correctly, and definitely invested himself and his own funds into the company.
There's a good number of folks that picked up shares in the 5-10 cent range, and can be greatly tempted for 2x to 4x profit. I picked up quite a few at the same pricing and am more than content to hold, since I also anticipate continued improvement.
50K bbl per well, 50 wells possible
The way I read the news release is that they estimate 50 drilling locations, each with 50K bbl estimate. If the vast majority of drill spots are productive the totals appear healthy for all involved.
Sorta expected a bit of a bump and volume
Maybe not a lot, but the Kentucky news does seem positive to me. Seems a bit odd that it hasn't resulted in much movement.
Interesting terms for deal
I like that there is no actual cash out of pocket for daybreak, though they did give out a good number of shares - but in so doing effectively used the shares to get three good things: (a) the 25 working interest, (b) lowered their current loan rate, and (c) become the net 4.8% positive financier for App. If the oil runs that would seem to be a good deal.
These wells in KY are starting up soon - first one spudding today.
Also remember that they have some more wells to drill this fall in Kern Co.
Daybreak acquires acres in Kentucky
This just came out late today after hours. I deleted the traditional long caveat section at the bottom of the press release.
Daybreak Oil and Gas, Inc. (DBRM) ("Daybreak" or the "Company"), a Washington corporation, is pleased to announce that it has acquired a 25% working interest in approximately 6,100 acres in two large contiguous acreage blocks in the Twin Bottoms Field in Lawrence County, Kentucky. App Energy, LLC ("App") is the operator of the project and owns the remaining 75% working interest. Pursuant to a joint operating agreement between App and Daybreak, the two companies have committed to drill three shallow horizontal oil wells in the Berea Oil Sand, which is at approximately 1,500 feet with over 50 drilling locations identified on the leases. Vertical gas wells currently on the leases have penetrated the Berea Oil Sand with log and other data indicating potential proved oil reserves are present in these reservoirs. In this same area of Lawrence County, Kentucky, over 40 horizontal oil wells have been drilled in the Berea Sand in the past year with substantial initial oil production rates along with associated natural gas. Oil reserves per well are expected to have an estimated ultimate recovery of 50,000 barrels of oil with estimated well cost of approximately $800,000 per completed well depending on the length of the lateral production leg of the well. The first well in the initial three well program is expected to spud on September 3, 2013.
The Company is also pleased to announce that it has favorably amended its credit facility with Maximilian Investors LLC ("Maximilian") as part of this transaction. Under the terms of the amended and restated credit facility, the Company's initial credit line has increased from $20 million to $50 million and its interest rate decreased from 18% to 12% per annum. The amended and restated credit facility also provides for Maximilian to loan funds to the Company under a separate $40 million credit line to be loaned by the Company to App, primarily to fund its drilling operations. The funds initially loaned to App will accrue interest at 16.8% per annum and subsequent advances will accrue interest at 12% per annum. App's obligations to the Company are secured by a lien on and security interest in substantially all of App's property, including substantially all of its oil and gas interests in Kentucky. As a result of Maximilian introducing the Kentucky transaction with App to the Company, Maximilian was issued 6.1 million shares of the Company's common stock on a fully-diluted basis and a warrant to purchase 6.1 million shares of the Company's common stock on a fully-diluted basis at $.10 per share. The Company has also granted to Maximilian a net profits interest of 50% of its net profits after the Company has recovered its costs from its Kentucky drilling operations with App.
James. F. Westmoreland, President and Chief Executive Officer, commented, "This transaction is a perfect complement to our California operations with similar characteristics; such as shallow oil, low risk, and moderate cost to drill and complete. A major benefit to Daybreak is that the Kentucky wells have initial production rates that are substantially higher than our California wells. We anticipate the production rates will level out to approximately the same rates as our California wells within a year of being brought into production. With the addition of these new Kentucky properties to our California properties, the Company expects to see a significant improvement in its cash flow and earnings. We are also pleased to team up with App, an operation that has personnel experienced in oil and gas operations in the Appalachian Basin of Kentucky. Their expertise brings significant value to the operation and we look forward to a long working relationship with them. We are also pleased that Maximilian brought this transaction to us, and as a result we were able to favorably amend our credit facility. This will allow us to not only participate in the Kentucky project while continuing our development of our California project, but it will also give us the opportunity to seek other projects with similar characteristics that will complement our ongoing operations in California and Kentucky."
Daybreak Oil and Gas, Inc. is an independent oil and gas company engaged in the exploration, development and production of oil and gas in California and Kentucky. The Company is headquartered in Spokane, Washington with an operations office in Friendswood, Texas. Daybreak owns a 3-D seismic survey that encompasses 20,000 acres over 32 square miles with approximately 13,000 acres under lease in the San Joaquin Valley of California. Daybreak also owns a 25% working interest in approximately 6,100 acres under lease in the Appalachian Basin in Lawrence County, Kentucky.
More information about Daybreak Oil and Gas, Inc. can be found at www.daybreakoilandgas.com.
Contact:
Ed Capko Telephone: 815-942-2581
Investor Relations Email: edc@daybreakoilandgas.com
Goldman re DBRM
I'd be curious what prompted Goldman's coverage. i suspect DBRM just came up flagged by a tracking program due to recent share price rise and he decided to write it on his own.
I've been invested in DBRM for a number of years now, and certainly am happy to see the drilling, production and shares climbing. During that time I've talked with CEO Westmoreland many times. I've not asked, but am quite confident he didn't sponsor this report. He's conservative and careful, and, if anything, a bit averse to PR in general. Seems to me like he doesn't even share some of the good news when he does have it. Take a look at the last few years of releases - DBRM doesnt say much, and certainly nothing that sounds like exaggerated self-promotion. He's never worked for short-term pps gains.
More good news - incl more well locations
Today's PR states Ball 2-11 is productive, and ...
“This well has helped to define the size of the Ball reservoir; and, with its success will add additional proved reserves, as well as the
potential for seven to eight more drilling locations here. All of the East Slopes area development wells in
this drilling campaign have been successful and encountered pay intervals and production rates which meet
or exceed the pre-drill estimates."
I love that 7-8 more well drilling locations. It's finally rolling. not speeding, but rolling very nicely. With income they can keep drilling more well and, hopefully, keep finding more spots to drill.
excellent. I was looking at a year old 10K with # of wells and total well-days, etc. the numbers seemed low, so I must have multiplied something wrong somewhere. Does appear I was off by almost 10x exactly....
I believe that the wells in this area, with this particular heavy oil, have been averaging about 3 barrels a day per well. That's based on previous 10K reports. Daybreak has rather low production costs, particularly for incremental wells feeding the same production facility. These are not high pressure gushers, but 6 or 7 wells will, if successful, give a great boost to incoming cash. 21 barrels a day does add up fast relative to Daybreak's overall size, and gives them funds to move into more of their property.
If I had sold at .07 the last time it was there, then bought at 0.035, and sold at .07 again now, I'd be a wealthier man!
But, I didn't sell at .035, either.
I think that the announcement helped, obviously, but any real change and attention is going to wait until news comes out on holes in the ground and production figures that show the promise of actual revenue. The drilling news could come rather soon, with at least some comment that the hole is productive (or not). The production volume news would likely be out farther in a quarterly.
Therefore I suspect we'll have to wait a bit longer.
Other future promise thoughts
I've been invested, and watching, for years too. And disappointed that it hasn't moved faster. Mgt has, however, generally did everything they said they were going to do - they just have very carefully kept those promises modest. The biggest disappointment lately has been the problem with getting external funding to drill more wells. That is partially an external problem in the current market, and partially a problem with the company in that potential investors are rightly skeptical that they would get their money back. So CEO putting his own money in as backup is, to me, a major positive. It would have been much easier to dilute the stock, but that has been repeatedly rejected. The recent Bull Run drilling wasn't actually a dry hole, either - they hit oil, but not enough to want to put the hole in production. Mr Westmoreland is (perhaps a bit subjectively) optimistic that the hole DID inform them regarding depth and location, and he is confident that the next boring will be much more productive.
Daybreak is, like a lot of companies, under capitalized. A few more good wells could really turn that direction by providing flow that can fund more drilling, or make any loans much easier to justify.
UBS Bank is source of funds
From the official filing:
"On November 4, 2011, Daybreak Oil and Gas, Inc., a Washington corporation (the “Company”), received an advance of $250,000 on a new credit line (the “Credit Line”) established with UBS Bank USA c/o UBS Financial Services Inc. (“UBS” or the “Firm”)."
separately, a release states
This Credit Line is being completed in two tranches, with an initial tranche of $250,000.00. The second tranche of approximately $640,000.00, creating a total credit line of $890,000.00,
No volume seems odd...or not?
Not that I really expected a big jump on news of a credit line, but it does seem a bit odd that there have been no shares traded at all since news of the credit line came out. Unless of course everyone who has shares is more positive and planning to hold at least until some results are announced - and folks that want to buy don't want to bid up too much just on news of a loan.
The credit line certainly might serve as a bit of a bridge, but isn't enough to replace the dollar volume of the finance package that we were expecting.
Could we get three more wells drilled and running for the $450K, with enough production to bump the cash flow up to free up some other financing?
Mav - I see some right, some not so right, in your post...
As usual, I agree with you on some - but will disagree on some others.
>> It's a small time shoe string bare bones slow operation with multiple partners on a lease that's way to large for them to develop.
-- Yep. The first half of that is spot on. shoe string bare bones. A lease thats way to large? Well, sort of. Bigger than they can chew right now, certainly. But (hopefully) moving forward this will be part of the great value.
>> ... after 4+ years that the CEO...
--- Sorry Mav, but Westmorland only became CEO on Oct 2008. Thats a quarter shy of 3 years. Should more have been accomplished? yes, I think so too. I've been a shareholder for longer than Jim's been CEO. I, too, am disappointed. But I'm also mostly optimistic. Not without reason, I think.
>> I heard years ago that there was to be a build out of 50-65 wells on this lease.
-- Well, I do think that's the dream and long-term plan, and there is room for it, but nothing like that has been claimed in the shorter term. The June 2009 Shareholder Letter (8 months after Westmoreland became CEO) was very, very plain. Copy on the company website. It reads:
"Our priority during 2009 is to drill and complete three to five development wells at our Sunday and Bear locations in California, and finalize the construction of permanent production facilities."
That's during 2009. They did just what they said they were going to do. Would I have liked more? Yes. Did they bait and switch? No. Read the 2010 report - very clear, rather conservative, and they delivered what they said they would. We don't have a 2011 shareholder letter yet. Would I like one? Yes.
Should we have to be the primary cheerleaders? No. I do think a bit more PR on actual accomplishments would be better. Not fluff, not optimistic shilling. just good news about good things.
I'm pretty sure that Ed Capko (PR/IR) thinks that they should share more good news too. But CEO decides that strategy. I've personally shared my opinion on that with Jim.
You keep saying all these things that Westmoreland should do.
Have you actually called him to pitch your recommendations? If not, then do so. That's your right as a shareholder. But don't count on him reading this forum and changing his policy based on your posts.
King of Repetitive Redundancy
M1, will you please at least find something NEW to complain about?
I could randomly pick any of your last 30 posts or so and the rant is the same, over and over and over.
I actually agree with you on a few things, but go bluster somewhere else for a few weeks.... or a few months
financing update
As per conversation with Ed Capko, closing was delayed by the financing source, at their request, due to a bit of overload on their legal staff. the DBRM funding is part of a larger bundle (~$40M) that was all going through at the same time. not enough time for the paperwork. Should be finished this week (8th), same terms, etc. no concerns or worries on their part or DBRM.
A short notice was placed on the yahoo finance site, but without the background explanation:
http://finance.yahoo.com/news/Daybreak-Oil-and-Gas-Inc-prnews-1858933712.html?x=0&.v=1
OK, M1, we get it. Youre not happy.
You are also being very repetitive.
No need to repeat all your concerns and frustrations to me, either. I can see them in your last 20 posts, or so.
Many of your questions are good. Some just indicate immature baiting.
CEO Jim actually answers the phone and talks to people. I've talked to him a number of times. I've expressed some similar concerns. I've gotten a few answers, and made a few recommendations.
Take your questions - the decent, normal, non-childish ones, and ask him.
And then either sell, or don't sell, but please cease the tirade here on the ihub board, OK?
I too have talked with Jim a number of times. Always as candid as he can be under the circumstances - both with successes and challenges. Target locations are ready to drill as soon as funding in hand. With operating costs pretty much covered, new wells provide nice net $$ toward future production & acquisition. Not huge, per well, but very nice.
Many other non-drilling/non-production distractions are behind them now, such as joint-venture buyouts and related legal issues, sales and tracking of old properties and related security deposits, etc.
10K last 3 months (ending feb 28)
Forgot this on the last post.
For 3 months ending Feb 28
3805 bbls
$320,375 revenue
That would be just about full production at this time I suspect, since I'm not aware of any other holes drilled but not producing.
If so, then that would give an annual projection of about
15,200 bbls
$1,280,000 revenue
from the current configuration. Might rise a bit if they can increase flow in a few, perhaps. Could electric service to Dyer Creek allow that to increase a bit?
Major progress. Need those other 11 wells!
10K quick summary - growth & challenges
Nearly 100% revenue growth, not quite that in bbls, and a 25% drop in LOE costs over the past year
2011 Revenue $975,479 from 13,009 bbls at $173,234 LOE cost
2010 Revenue $469,357 from 7,480 bbls at $240,607 LOE cost
Average LOE cost has dropped from $32.17 to $13.32
Indebtedness is high, and drains cash from revenues
Electric service to Dyer Creek was finished in March 2011, which will drop production costs substantially
Additional drill locations identified:
At least 3 in Sunday
At least 3 in Bear
At least 2 in Black
At least 2 in Ball
At least 1 in Dyer Creek
Notes on new areas with combined estimated gross reserves of a bit over 9 million barrels:
Bull Run Prospect
Glide-Kendall Prospect
Sherman Prospect
Baker Prospect
Breckenridge-Chimney Prospect
Tobias Prospect
No legal issues at this time
Cash is low ($57K), assets went up. Liabilities went up a good bit too, mostly due to drilling costs and production facilities.
I like this note about how the lower cost of production
"should assist us in maintaining a positive cash flow from our East Slope operations in Kern County, California during the next fiscal year."
Positive cash flow from operations.
For the year ended February 28, 2011, we had a positive cash flow from operating activities of $184,673,
A good note on efficiency:
"For the years ended February 28, 2011 and 2010, we did not drill any dry holes"
$329,834 (from original $1.5m) still accounts payable as part of the acquisition of rights and becoming operator