is working (too hard) for a living
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Fully agree that dilution was always going to be required for drilling, although the current dilution is an order of magnitude more than the Smart Win transaction in terms of pre-money valuation.
It is last year's dilution by Malcolm Bendall that really bothers me.
Even rig mobilization will not be supported by exercise of this option, if we are to believe the company (and we always do, right?). Per the September 8K:
In addition to other obligations these funds are expected to allow us to complete our audit for the year ended December 31, 2010 and therefore to file our 10K and interim quarterly reports on Form 10Q.
Someone has to fund the drilling.
Malcolm has signaled he will sell half the company for $5M to drill. I am assuming 'signaled,' as there is no 8-K to support the most recent PR that he has actually done so.
But so far, no takers -- amazing, for opportunity valued at $2.3B per other PRs and the company's supporters.
My own calculations (based on published reports, plus likelihood of success (2% on Bellevue)), suggest that $40M would be an appropriate valuation of the opportunity -- so I am surprised that someone doesn't 'take a flyer' on this. $40M expected value, $2.3B upside -- wish I had $5M to sink into this.
Maybe no-one trusts management. Three directors have decided it is not worth their time, including one (Mr. Leach) who specializes in raising funds for companies such as EEGC.
Wonder who sold stock on the most recent PR, felt like 'pump and dump' to this (considerably poorer, thanks EEGC) observer.
Apologies, for some reason my posting doesn't seem to show up in detail, just the 'headline.'
Will try again:
I can't defend the company on this PR.
Agree with you, no 8-K = no deal.
This PR reminds me of the one which was headlined, "Sure Capital sells $180M of Notes" (or some such -- not on website any more...), and the detail of the PR revealed a plan to achieve a sale rather than a sale itself.
In this case, we have a similar headline, and some verbiage which SEC may elect to investigate re: 'pump and dump' (emphasis added by author):
Empire has secured several strategic commercial partners ... while retaining a 51% majority interest...Empire has sold a 49% stake in return for USD $5 million funding by way of a convertible loan agreement
. Libertas ... has been retained to assist Empire with financing... Empire has sought to implement a key industry partnership to fund and assist in the drilling of ... Bellevue #1 ... It is proposed that in exchange for the 49% stake, Empire will be able to exploit the technical and exploration know how of its joint venture partner...
My 'net' on this is that EEGC is signaling to the world what kind of deal they would accept (sale of 49% for $5M, to someone with oil and gas knowledge which could be leveraged), and hoping for a response.
Of course, real companies call the biz dev department of industry stalwarts and conduct negotiations in private.
Hopefully, I am proven wrong by the filing (albeit late) of an 8-K including the actual signed agreement. Note that an 8-K was filed with the Sure Capital agreement signing, even though no funds were raised at that time.
Not sure the filing requirements regarding the reporting MOU, perhaps others can advise. I do know that a filing is not required when an LOI for an acquisition is signed, the MOU may well be analagous.
I can't defend the company on this PR.
Agree with you, no 8-K = no deal.
This PR reminds me of the one which was headlined, "Sure Capital sells $180M of Notes" (or some such -- not on website any more...), and the detail of the PR revealed a plan to achieve a sale rather than a sale itself.
In this case, we have a similar headline, and some verbiage which SEC may elect to investigate re: 'pump and dump' (emphasis added by author):
Empire has secured several strategic commercial partners ... while retaining a 51% majority interest...Empire has sold a 49% stake in return for USD $5 million funding by way of a convertible loan agreement
. Libertas ... has been retained to assist Empire with financing... Empire has sought to implement a key industry partnership to fund and assist in the drilling of ... Bellevue #1 ... It is proposed that in exchange for the 49% stake, Empire will be able to exploit the technical and exploration know how of its joint venture partner...
My 'net' on this is that EEGC is signaling to the world what kind of deal they would accept (sale of 49% for $5M, to someone with oil and gas knowledge which could be leveraged), and hoping for a response.
Of course, real companies call the biz dev department of industry stalwarts and conduct negotiations in private.
Hopefully, I am proven wrong by the filing (albeit late) of an 8-K including the actual signed agreement. Note that an 8-K was filed with the Sure Capital agreement signing, even though no funds were raised at that time.
Not sure the filing requirements regarding the reporting MOU, perhaps others can advise. I do know that a filing is not required when an LOI for an acquisition is signed, the MOU may well be analagous.
I have also not been a big fan of EEGC press releases, as to your point, they have tended to speak to what might happen in the future rather than what has happened.
However, the fact that the Libertas web site says that they have raised (past tense!) about $5M for EEGC is encouraging -- although whether that is current or refers to something in the distant past, don't know.
The site also said that Libertas has advised on sale of a $5M stake in the company, which would appear to be the current exercise.
However, the EEGC PR has a level of ambiguity as to whether it is a 'done deal':
It is proposed that in exchange for the 49% stake, Empire will be able to exploit the technical and exploration know how of its joint venture partner in addition to approximately USD $4 million in order to recommence on-site drilling operations at the Bellevue #1 site.
Mr. Leach's departure as an EEGC Director, as well as his performance in that position, is a disappointment.
For 18 years, he has been a Director of The Oster Group, an investment banking operation which specializes in the funding of emerging companies.
Thus, when he joined EEGC, I pointed out that his professional experience could really help with the thing that mattered most: fund-raising. For whatever reason -- and we don't know what goes on within the EEGC board room -- that hasn't happened.
Less than a month until the one year term on the Bellevue lease is over.
Same address as on the October 2008 report.
But a different address than on the RPS 'Australia and Asia Pacific' website:
Perth - Main Office
Contact:
John Tompson
Chief Executive Officer
38 Station Street
A little more google work, however produces the following page:
http://www.rpsgroup.com/ASEA/Offices/Perth-wa6014.aspx
Which does appear connected to the 'RPS Group,' which is how RPS refers to itself on its 'corporate' website.
So, think we are good with this report having been done by 'real' people with background.
PS. If someone were going to try to 'cook the books,' Bellevue's chance of success would have been far greater than 2%...
Relying on EEGC press releases as a source of complete and accurate information is not wise. To put it nicely, they are 'wordsmithed.' Others would be harsher, and I wouldn't argue.
EEGC uses 'recovery' because they want them back. They weren't taken away, they just expired. EEGC is trying to shame MRT into allowing them -- but the strategy is not likely to work.
If EEGC can't get financing to drill the largest prospect, which also has by far the highest likelihood of success per RPS Energy, they will never get financing to drill the other prospects. MRT is absolutely focused on the ability to finance exploration as a criterion for leasehold rights.
Having someone committed to buy production would be a good thing. And at $200/bbl, who could argue.
But financing to enable drilling is a lot more important.
The lease required Bellevue drilling to completion by the end of one year.
While I think MRT could 'compromise' if committed, documented financing is available, it strikes me that an unsolicited proposal to sell oil which has not been discovered, to a foreign power, will not have a lot of value for EEGC to the inevitable 'back and forth' discourse between EEGC and MRT.
I'm guessing you will soon get a respone that instead it is up 20% to .012; of course, that was with a whopping $25 trade...
Absent financing, IMO pps will asymptotically approach $.001 - $.0025 as the mid May Bellevue completion deadline draws closer.
If I wasn't being paid in a timely fashion, or was being paid with checks that bounced, I'd be an ex-employee too! Wouldn't you (although maybe you would hold out for stock options as a substitute)?
There is not much doubt about the story's accuracy, given the televised copies of unsigned checks and returns for insufficient funds, together with the fact that some employees were subsequently paid by the company, and the company was told to pay others and had penalties assessed.
However, as suggested by another poster, it would have been good to hear the company's side of the story -- together with a statement that it won't happen again.
I can't believe a story like this will help Barista recruiting!
Management not taking salaries, ok fine.
Management not paying first line employees -- sixteen documented reports with the appropriate authorities, who knows how many others have not filed -- not so much.
Factual information on relative value of the ten prospects.
If you take the RPS 'percentage likelihood' for each of the twelve prospects, and apply against the mean estimate of bbl in each, turns out that 82% of the total number of 'expected barrels' are found in Bellevue and Thunderbolt. That is, they are the two biggest prospects, and Bellevue has by far the best chance of success (2% versus next best 1.2%).
Indeed, Bellevue alone is 75% of the expected reserves, using this calculation methodology.
While I appreciate that EEGC wants to protect all that it can -- they are ten weeks away from failing to meet their commitment to drill Bellevue, at which point the whole subject becomes moot.
Then, onto the unnamed technology on which a deposit was placed last summer, and we can again watch attempts at raising money (assuming, of course, that the technology was actually purchased, but that is another story).
Mr. Bendall purchased his RO shares in the first round through the conversion of past due salary the company owed him, as well as conversion of cash advances he had made to the company to keep it running.
The stock was well under $.07 at the time of this conversion. Mr. Bendall fans will point out that this was very magnanimous, to convert $.07 of debt into $.04 of stock; detractors will point out that Mr. Bendall was never going to be paid unless oil was discovered which would move the stock well above $.07/share, in which case the net impact of this transaction was to dilute shareholders.
But we digress.
The documents are somewhat obscure as to how the additional RO shares were acquired. But there are some very strong hints that lead to certain conclusions:
- On June 30, 2010, the company's financials do not show $6M owed to Mr. Bendall, or any other director.
- The company's Q3 2010 10-Q says that:
In addition, the Company made a deposit to purchase a technology license from a
company controlled by Mr. Bendall using a loan in the amount of $7,000,000
. In the 2nd round Mr. Bendall converted $5,845,453.18 of personally held Empire Energy debt into equity shares at a price of 7 cents per share.
Regarding whether shares for technology happened, you have a partial point, but stated shares outstanding is not the basis for that.
The initial $7M 'deposit' did happen, Mr. Bendall took that payment in RO shares.
The company's Q310 10-Q says the following in Note 4:
Completion of this acquisition is expected to be completed (sic) in the fourth quarter 2010 or the first quarter 2011. Total cost of the acquisition is expected to be $21 million ($14 million in addition to the deposit held), initially funded by Company unsecured debt convertible to Common stock at a price of $0.07 per share.
Well, people want to see if the company can be profitable.
The financials posted earlier this month show $27K of profit in the fourth quarter (I'm not sure I have enough significant digits in my calculator to come up with profit per share, given shares outstanding) -- but that is ONLY because G&A declined from $35K/quarter in the first three quarters of the year to $12K in the fourth quarter. Surprising reduction, since the ex-Wolfgang Puck executive was brought onto the team during that timeframe. Maybe someone is working on no salary, not sustainable.
Liquidity a problem; accounts payable are more than six months worth of cost of goods and operating expenses, and there are less than ten days worth of expenses in the bank in cash.
Prospects for this company looking forward -- can they raise viable financing to support an expansion program without significant shareholder dilution. Can they expand without adding to central overhead??
Interesting that there was an employee/shareholder receivable of almost $50K, anyone have insight into that?
Indeed, Mr. Bendall has not been taking salary for years according to the company's SEC filings.
However, his sale of unnamed technology to EEGC has totally diluted the company (the RO was the deposit, plus double that number of shares for full payment of the technlogy) to his personal benefit in the event that oil ever does get found, thereby significantly reducing upside for the average investor.
The good news is, the stock would go to him at a value of $.07; the bad news is the dilution which would occur.
And why EEGC should be buying the unnamed technology has never been explained.
Regarding independent valuation of the mystery technology.
IF it is the flare gas technology, EEGC's October 26 PR had this to say:
A business appraisal for the potential economic value of this flare gas technology for the aforementioned regions has been calculated by AECOM, a Fortune 500 company, at approximately $2.7B in annualized revenues upon realization of the technology's roll out with numerous joint venture partners currently under consideration.
The issue isn't +/- 20% day to day, when market cap is $5M.
The issue is a financed business plan (whether it is exploratory drilling, the company's expressed mission; mystery technology bought for $21M; or affinity credit cards/medical waste technology distribution in West Africa); pps takes care of itself after that -- of course, assuming (perhaps a stretch for the current team) some level of competent execution.
One can also find the Sept 1 and Sept 3 PRs in ihub postings on those dates.
Interesting reading for the masochists amongst us.
Also for the optimists who wonder why some of us question EEGC management capability and credibility.
Not sure how 'transparency' is measured -- EEGC does a lot of PRs with 'forward looking' statements that don't come true.
Also inaccurate information -- for example, the 'completion' of the GMH acquisition announced in the October 26 PR. The Q3 10-Q says the following about the GMH acquisition:
A deposit was placed to pursue this arrangement (purchase of GMH) with the use of a loan from CEO Malcolm Bendall. Transaction is expected to be completed in the fourth quarter 2010 or first quarter of 2011. Additional funding will be required to complete these acquisitions.
I wouldn't hold my breath waiting for an 8-K on on the mystery technology transaction.
- Still no 8-K from either Grand Monarch Holdings or EEGC on the acquisition announced as 'completed' on October 26, 2010, per the company's press release.
Which is still up on the EEGC website -- perhaps in error, as several other 2010 PRs are not:
- August 10 (RO results; new directors)
- September 1 (LOI for GMH acquisition)
- September 3 (drilling recommencement scheduled for Nov; GMH projections)
- Grand Monarch Holdings, a company of which Mr. Villarreal is also chairman, has yet to file its 10Q for the quarter ended June 30, 2010, and has not even bothered to file a NT-10Q for the following quarter.
Will be interesting to see the timeliness, as well as content, of the EEGC 10-K due on March 15.
Good recommendation.
Well, in fairness, we don't know if it was the flare gas technology which Mr. Bendall sold to EEGC. The SEC filing did not identify what technology was sold.
Maybe something even better than flare gas?
We do know that EEGC elected to buy it at several times the company's market cap at the time, so a really Big Bet.
Net: Not only did Mr. Bendall assist in 50% dilution of the stock immediately (as part of the RO), the transaction could give him double that number of shares.
A coin flip: heads Mr. Bendall wins, tails the shareholders lose.
- If pps goes above .07 (which IMO would only happen with a successful oil find), he can get elect to take shares and shareholders are diluted.
- Absent such a strike, likely the company goes bk because it can't meet its liabilities (including the $14M owed to Mr. Bendall), and Mr. Bendall gets to keep his technology as the transaction is not consummated.
Perhaps the new Chairman and Board will show their acumen by cancelling this transaction, and retrieving the RO shares from Mr. Bendall.
Or maybe not; the new Chairman is the principal of Grand Monarch Holdings, owner of $10M of revenue opportunity, per EEGC PR, which EEGC was to acquire; once he became Chairman, that transaction went silent.
Samo, samo. Just shuffling the executive suite loungers on the Titanic.
Would sure like some positive stuff to talk about, and sorry rogerwilco 8% increase on no trading volume doesn't do it for me.
Perfect summary
I'd love to get enthusiastic about pps, but at this volume it doesn't mean much.
What will pop the stock is financing for Bellevue completion. But that has been true for many years.
Instead, BOD spends its energy committing $20M+ -- several times the company's market cap -- to a technology so mysterious it cannot be disclosed to shareholders.
And, announcing the 'completion' of acquisitions which apparently haven't happened (Grand Monarch -- at least, no 8-K filed).
I had no theory of inside information, that was someone else.
I did say that even small shareholders COULD have inside information.
BTW, just because pps is back up does NOT mean the seller didn't have inside information, Could be the news isn't out yet.
But I have no factual information as to whether the seller did, or did not, have inside information. All I know is that he wanted $8500 more than he wanted 1.3M shares of EEGC -- for whatever reason.
$8500 invested is a bit misleading.
They received $8500 out of the trade of their position, so that was the result of their investment -- but you don't know their purchase price. Consider the possibilities (which are depressing facts for some of us):
- Less than three years ago, the stock was over .15/share, so they could have invested $200K for their 1.3M shares.
- Slightly more than six years ago, the stock descended below $1/share for the first time -- so they could have invested over $1M.
- In early 2000, according to Yahoo, the pps touched $50/share, so they could have invested $65M, that would have been Real Money.
However, the concept that their need for $8500 now was greater than what could be expected later is quite reasonable, and certainly depressing if they did possess inside information.
And small investors can have inside information -- I am sure barbers and hairdressers hear a lot of things which might translate into stock purchases and sometimes subsequently another form of haircut.
I think other posters have said the permit is not salable, but even if it was -- how much could one get for a permit expiring in 3.5 months (unless Bellevue is completed by then).
Note that EEGC is valued today at $6M; an auction would likely get only a piece of that, since I am sure some of the value of the stock is for the unnamed technology for which the Board has committed over $20M to Mr. Bendall, as well as the cash flow opportunities presented by GMH, a transaction which the company announced as 'completed' three months ago.
If EEGC knew that Sure Capital was a bogus company, shame on the EEGC CEO -- who subsequently received a sweetheart deal from the Board of Directors related to purchase of some unstated technology for several times EEGC market cap.
So shame on BOD as well.
Meanwhile, nothing happening.
In fairness, the due diligence information does not contain the name of the 'intermediary,' although certainly Sure Capital is the only intermdiary's whose name was published in the time frame and so highly likely to be the one.
But if in fact Sure Capital mis-respresented themselves, than I would think EEGC would have some level of recourse.
Consider the source of that post.
There are many similar postings over the two years I have been following which have turned out to be of similar accuracy.
Hi, Oilsleuth:
Good to see thorough comments.
You ask
I'm not at all clear what the EMV (expected monetary value) (note: not "mean") figure for Bellevue and Thunderbolt is meant to pertain to. Since the figure is in the ballpark of past exploration expenditure I can only guess it is intended to be a valuation of the two prospects as represented to a hypothetical prospective buyer i.e. the present market worth of the project. Is that your understanding as well?
Hope EEGC is so connected. If not, pps .016 (.04 a year ago, far more than that two and three years ago) will go to .000.
I'd like to share my document review, now that I've been able to download (thanks, Doc Metz, for advising that the links were restored).
To the extent I am mis-quoting or taking out of context, as always I welcome correction and/or additions. Indeed, I will specifically request in certain places.
Jan 11 Investor Pitch:
- (page 8) shows that the 2010 financing -- which was to be a $200M debt instrument with a 70/30 JV with ARAMCO -- failed because (and I am quoting the investor pitch) 'intermediary source failed to properly disclose his inability to conduct business within the USA.'
Does this mean Sure Capital, the only publicly disclosed intermediary?? If so (and even if a different intermediary), what an incredible failure on the part of EEGC for not knowing this in advance before moving so far along.
And, if ARAMCO was indeed ready to go, I have to believe that another intermediary could have been found.
- (page 10 of pdf) clearly shows the 2% likelihood on Bellevue, and .72% on Thunderbolt.
- (page 24) shows that the desired first tranche of $25M includes $8M for purchase of a rig (I continue to disagree with using capital that way absent discovered oil), $6.2M to complete Bellevue, and $5.0M to complete Thunderbolt, among other things.
Jan 11 Due Diligence Report
- (page 28) a cap table, which shows the RO, but does not show the remaining $14M of the $20+M transaction between EEGC and Mr. Bendall related to the flare gas technology, whereby Mr. Bendall would receive a $14M note convertible into EEGC at $.07.
This is a complex area, but if the transaction was sufficiently advanced to give him RO shares, not sure why a cap table would not show the remaining shares. But perhaps another poster can correct me on my understanding of the transaction.
- (page 167) A December 2009 report from RPS Energy, likely the one previously referred to by Mr. Haftel, but not previously published.
It looks at the likelihood of finding oil, costs of production and distribution, time value of money, and extrapolated oil pricing to come up with an expected mean value (EMV) of Bellevue and Thunderbolt: $50.9M (low case, $24.5M; high case, $87.7M) -- not unlike the $40M I have previously posted (using less sophisticated back of napkin.
(I would particularly invite corrections of my interpretation of this report; Mr. Haftel was previously very vociferous in his view that the updated RPS Energy report supported a much higher EEGC valuation, but I don't see it given normal risk premiums, lack of funding, and pending significant dilution from the Bendall transaction)
- (page 48) A two page letter dated June, 14, 2010 from Virginia Energy Consultants (based in Marshall, Virginia, US) which puts the likelihood of success for 13/98 at 35% on a 'quick look estimation,' well over the percentages which RPS Energy presented in their detailed report at the prospect level, and likely used in the Dec 2009 report.
Interestingly, the overall methodology is similar: you look at four probabilities, and multiply them, as follows:
Probability of Active Oil Source Rock x Probability of Effective Reservoir Rock x Probabilityof Oil Trapping Structure x Probability of Effective Impermeable Seal Rock = Probability of Geologic Success
Highest volume midsession was at the low point of the day, as was the volume spike at the end of the session, when it closed at the day's low. Overall gain for the day, 1.2%, on less than daily volume average (per yahoo). I'm not a technician, but doesn't seem like a heavy buying interest resulting from this PR which came out before the market opened.
With respect to the PR -- was anybody able to get to the posted information? When I 'clicked through' the PR, I did get a www.empireenergy.com page with three separate things to click on, but got an http 404 when trying to click further through. When I went to the empire energy website directly, nothing there that I could find to click on. Indeed, no PRs posted since July (maybe we just imagined the PRs on the RO and GMH...).
Maybe more tomorrow.
I find it interesting that EEGC is unhappy with MRT sharing their 'private information' at the same time they publish the very detailed SEL 13/98 report, and RPS Energy report, and are apparently (in the PR) inviting investor review of the due diligence work for the new investment firm which would seemingly need to be pretty detailed, unless it is simply another rehash of the RPS Energy report, long since publicly on the EEGC site. More comment when I am able to read it.
I am guessing that the government's ability to share 'proprietary' information developed during a leasehold is clearly spelled out in the leasehold, and so should not be a point of issue; hard for me to believe the government would not respect their own rules, so I'm guessing there is more to this matter not being shared. Maybe EEGC provided more information than they had to under the leasehold, and are suprised it is being shared; but once provided, perhaps it automatically becomes public property. But I am admittedly just speculating, maybe others know the MRT leasehold system more and can explain.
Here a penny, there a penny, pretty soon you have a dime.
Unfortunately, a dime DOWN in EEGC case over last three years.
Actually, fluff from Mr. Villarreal -- he owned GMH, he is now EEGC management as well.
Which adds its own level of 'depressing.'
$20M would be better for shareholders. If oil is actually there -- which seems to be doubted by prospective financiers -- it should be discoverable with $20M and the other $180M needed for full scale development could be sourced at a much better valuation.
Absent financing, pps will gradually head to zero by May 16.
Unless some other financier decides the non-stated technology to which EEGC's BOD has committed $20+M to Mr. Bendall is actually worth developing.
And, while we are talking -- whatever happened to the acquisition which was announced as 'finalized' back in October, with a multi-million dollar profit stream coming from affinity credit cards and medical waste technology. Haven't seen filings from either EEGC or the 'acquired' company.
Where is Mr. Haftel when we need him, perhaps he can shed light on all of these subjects through his contacts.
It doesn't take 'inside information' to know the company has not raised financing in the Middle East:
- If they had raised financing, they would have filed an 8-K as a material event.
- They have not filed such an 8-K.
- Therefore, they have not raised financing.
On the other hand, a cynic would say that EEGC has a habit of not filing 8-Ks when they should (upon the announced 'completed' acquisition of Grand Monarch Holdings; or arguably in committing $20+M, several times the company's market cap, to a related party -- Mr. Bendall -- for unnamed technology), so maybe they have raised Middle East financing.
In which case, I would note that the most recent PR, silent about the Middle East but announcing the hiring of a North America firm to help them find financing, is a pretty good indicator that Middle East finance has not as yet been acquired.