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Good question and I think the answer is yes. No one in their right mind would provide $2.5 million in financing that eventually converts to common shares if they didn't think the original $2.5 million would be worth more, maybe way more, later. So if FNRC gets the financing, it would be a good indication to me that things will likely be looking up in the near future. At least the investor of the $2.5 million would have been convinced of this likelihood, it seems to me.
Keep in mind that the $2.5 million, or 1 million series B shares, has the same specifications as the dividend shares that we just received. They both convert to 100,000 shares of the old common per original share in 6 to 12 months. Of course, everything is being restructured by a factor of 1 for 20,000 due to the reverse split, so the 100,000 share ratio would go to 5, best I can tell.
Bottom line is that we probably will have a float of 250,000 to possibly 1 million shares immediately after the conversion, with the float possibly going to 7 million in 6 to 12 months with the addition of the dividend shares and the series B conversion, as I explained in my earlier post.
When you think about it, this puts us in a window of about 6 to 12 months where we have a low share count and the possibility of good news coming any time now.
For example, if you assume that FNRC is valued at $14 million, which is the amount of restricted cash that it has, and that the float will soon be 1 million shares, you come up with a possible share price of $14. Not bad, considering we will likely start out at $2. Best I can tell, $14 would have been about $.0007 before the reverse split and the dividend shares. So if we go to $14, I will probably sell my original shares and hold the dividend shares for next year.
It is all very complicated. I believe it is designed to be that way in order to make the creative financing work. If FNRC gets the big well in Ohio, then hopefully Mr. Norris will clean everything up financially.
Cropduster
My take is that many folks are still in shock over the reverse split. No doubt. But let me give you my thoughts about what is going on.
First, it looks like the starting point for the new shares is going to be $2 per share. I say this because if you look on the 1st NRG Corp website $2 per share is listed under the quote section. But no volume yet. Why no volume yet? My take is that it could take awhile, maybe a few days or a few weeks to get the old shares converted and trading cranked up on the new shares. But that is just my guess. My old shares still show up in my e-trade account, but the FNRC name was dropped and a number assigned for reference. I don't think they are tradeable at the moment.
So why do a reverse split now? Again my take is that Mr. Norris, the CEO, is being bold and aggressive in his attempts to save the company and end up with a financial benefit to himself. No doubt he could have declared bankruptcy some time ago, but didn't. Why not? I think he has reasons for keeping the company together and can see the light at the end of the tunnel. You would have to ask him exactly why he apparently refused to go the bankruptcy route. In any event, I'll stick with him for the moment.
Keep in mind that Mr. Norris and one other director were awarded 15 billion shares last year for services rendered. The shares were restricted. All of the current creative financing and the reverse split could have something to do with the restrictions on those shares and the ability of Mr. Norris and the other director to either return some or all of the shares to the company or reap some kind of financial benefit from the shares for themselves. It is hard to tell because FNRC has not published a quarterly report at all so far this year.
When we do get our new shares, it is possible that we could see a spike in the $2 share price on news from either Wyoming or Ohio. I say this because the initial float looks to be only about one million shares (20 billion divided by 20,000). Plus, remember that 3/4 or that one million shares are held by Mr. Norris and the other director as restricted shares. So it is possible that the actual float could be as low as 250,000 shares. Good news plus such a low share count could send the share price up significantly. This may be Mr. Norris' plan. We'll just have to see.
Also keep in mind that 6 million additional shares will likely come on line in the next 6 to 12 months. This would be up to 1 million from the share dividend and up to 5 million from the series B conversion, if it happens. The series B shares are the ones being issued to the new investor who provides the new $2.5 million in funding.
So my conclusion is that we could lose everything if Wyoming and Ohio go poorly or we could see a pretty good pop if we get good news later this summer.
Good luck all and keep posting. I enjoy reading everyone's comments.
Cropduster
Thanks for the link to the reverse split, EmptyBones.
I am surprised at the magnitude of the reverse split. Apparently we are getting only 1 new share for 20,000 current shares, effective on Monday 6-23-14. But I am not surprised about the reverse split itself. We have known for some time that a reverse split was likely, even though I don't think the company ever actually said it. But when you have diluted up to 140 billion shares and you think the company has a shot at survival, a reverse split should be expected at some point. I had thought it would be later, after Utica, but apparently not.
So what does this really mean? If you assume that there were eventually going to be 140 billion shares, then a reverse split of 1 for 20,000 would reduce the share count to 7 million shares outstanding, best I can tell. Where did the 140 billion shares come from, you ask? 20 billion current, plus 20 billion more later from the share dividend, plus potentially 100 billion more from the recent $2.5 million financing. Some of this is assumption on my part.
7 million shares is a good number to have, in my opinion, for a small company like FNRC. With some financial success, this will allow rapid appreciation of the future share price if the company recovers, which now seems likely.
What about the share price? Best I can tell, with 7 million new shares outstanding we should go to about $2.00 a share. This is simply the current $.0001 times 20,000. This makes sense to me, because the company has $14 million in restricted cash on hand, plus cash from the new financing, and a $7 million line of credit that I think is being used for the Utica play. In any event, $14 million divided by 7 million shares outstanding comes to the same $2.00.
Take your current shares and just divide by 20,000 to get your new amount of shares.
One possible scenario is that this could be a real good deal for current share holders "if" there is good news coming from the Wyoming methane wells and the Ohio Utica play. $2 could easily go to $3 or $5 or even $10 if the news looks promising for increasing revenue and profit for the company. No news or bad news and we could gravitate back down again.
Keep in mind why FNRC diluted in the first place. Number one was to prevent a take over of the company. Number two was the necessity to get involved in creative financing to tide the company over until the price of natural gas improved, which it has, and until the company could take a shot at drilling the Utica in Ohio. In other words, it was go through all this or go bankrupt. The company obviously chose to make a go of it.
This reverse split, if true, which it seems to be, could end up being a real good thing. Maybe management has a good feel that good news is on the way and right now is the best time to go ahead and do the reverse split.
Or everything I wrote above could be out in left field. We should find out this year.
Good luck to all.
Cropduster
Same here on my shares showing up. Just noticed my dividend shares are in my E-trade account now. Must have happened last night or early this morning. I had sent an inquiry to E-trade yesterday and they said the shares would appear in my account as soon as they got them.
In 6 months to 1 year our new dividend shares will be convertible into 100,000 shares of the common for every share of the dividend shares. This should effectively double the number of common shares folks had on April 28th, which was the day of record for the distribution.
Now what? Here is my plan.
I've got the original shares up for sale at $.0005. This number works for me and completely covers my cost for the original shares, plus a little profit.
Then we wait for a year and see where we are with the common, after the new dividend shares are converted. Should get at least another $.0005 or maybe more. Could be much more. In my mind, this could be the ticket to making a good deal of money on this stock. By then we should know how it is going in Wyoming with the drilling of the 8 new methane wells and how FNRC faired in Ohio with the Utica shale oil and gas play.
Good luck to all. What we need this summer is one or two good press releases concerning progress being made in Wyoming and Ohio.
I don't think the reverse split will happen until after we see progress in Wyoming and Ohio and probably not until after all these conversions take place.
Cropduster
My take is a little bit different.
I think the share dividend was really just a hat tip to current shareholders to make them feel like they are getting something, which they are. But it is designed to take the spotlight off the $2.5 million being raised from the 1 million series B shares currently being sold to raise capital. This 1 million shares will be convertible into 100,000 shares of the common per share of the preferred. So current shareholders are potentially being diluted by 100 billion shares, if the conversion happens.
Now add to that 40 billion more shares and you get a possible whopping total of 140 billion shares, if everything is converted. The 40 billion is simply the current 20 billion outstanding times 2, which takes into account the series E share dividend, which is also convertible into 100,000 shares of the common per share of the preferred.
Now, just for the sake of argument, say the company has a shareholder value of $14 million, which is the value of the restricted cash it has on the books. The last quarterly report shows $10 million, but lets bump that up mostly because of the $2.5 million from the series B shares being sold. Anyway, $14 million divided by 140 billion shares is about where we are now, or about $.0001.
Bottom line is that management is using creative financing to keep this company going long enough to see some necessary growth in the Wyoming wells, now that natural gas is going back up, and long enough to see a possible home run in Ohio with the Utica shale play. If you noticed, the company quit filing SEC quarterly reports some time ago and now simply posts them on their website. In my opinion, this was because audited quarterly reports for the SEC would have included a "going concern" clause, which FNRC did not want to see. It is a near bankrupt company that refuses to go bankrupt, in my opinion.
There is money to be made in this kind of company at this share price if they get Wyoming back on track and if they strike oil in Ohio. My gut tells me this will happen. Thats why I'm here.
Concerning the coming reverse split, my take is that it will be next year sometime after we find out what is going on with Wyoming and Ohio. And it will likely be 1 new share for every 1000 old ones, reducing 140 billion shares down to 140 million shares. By then we should have seen two or more spikes on news for all you short term types.
Final point is that I haven't seen my new shares show up in my E-trade account yet, but it is encouraging that the one poster saw 35 shares show up in his Fidelity account. Hopefully we'll all get our new dividend shares soon. Since they will be restricted, we probably won't be able to trade them for another 6 months to one year, but the original shares should continue to be tradeable now. So I don't think there will be much of an incentive to hold the original shares, even though some folks may do that.
Good luck to all and I am hoping for a spike to $.0004 or $.0005 on news sometime this summer.
Cropduster
Great post, MrDecember. You make some excellent points about the potential here, whether real or perceived.
My average cost of shares is about $.00035, but gets lowered to $.000175 with the preferred share dividend we'll be getting in a few days.
It occurred to me to possibly sell the original shares on the first good pop we get, say to $.0005, and then sit on the preferred and wait for another good pop, or maybe even just keep them for the longer term if the company starts showing a profit.
I hope your sources are right and we are nearing that UTICA moment.
Good luck and glad you are on board.
Cropduster
Jayben, I think there will likely be a reverse split coming at some point for the common, unrestricted shares. This will probably happen after the series E preferred shares are converted into common shares in 6 to 12 months. As we all know by now, this will effectively double everyone's holdings as of 28 April. So if someone had 1 million shares on 28 April, for example, they will end up with a total of 2 million shares in 6 to 12 months.
I expect the reverse split to happen after the company gets the Ohio project off the ground and starts showing some of the cash flow in their quarterly reports. A guess at how it could go is that the current diluted share price could go to maybe $.0010 on news that the company struck oil in Ohio later this year. Then we get the conversion of the series E preferred to common. And then I think we could see a reverse split of say 1 new share for every 500 original shares. This may sound terrible, but keep in mind that the initial rise in the share price of the diluted shares from the Ohio well will have already been realized.
By the time of the reverse split, the series B preferred shares, currently being sold separately to investors for $2.5 million, will likely already have been converted into common shares, giving a total of 120 billion shares outstanding, best I can tell. Actually, it would be 140 billion total if the 15 billion the two directors hold gets doubled also.
It is all very complicated, to be sure, but I think the current share structure is designed to keep the company from being taken over, to keep it from going bankrupt, and to reward those who invested in the company to keep it going.
I would also add that it looks like holders of the series E preferred (us) may have the option of simply holding their preferred shares and not converting them into common.
One final point. Why the dividend of preferred shares to the common at this point? In my mind this is to compensate the holders of the common to some degree for the fact that total common shares are being diluted up to possibly 140 billion shares, once all is said and done.
Cropduster
Daenerys, thanks for your kind words, but let me say that I don't consider myself an expert at all. There is another poster on the yahoo board by the name of Todd who probably comes closer to being an expert than I am on oil and gas. Sure would be nice if he would post over here from time to time. Also, please don't sticky any of my posts, as I don't want to be responsible for anyone buying into FNRC, as it is a very risky stock. Having said that, I am fairly heavily invested here.
Concerning the press release from this past week, I have some observations off the top of my head. It seems as if FNRC is going to sell 1 million shares of preferred class B stock for $2.5 million, but then they said each share is potentially convertible later into 100,000 shares of common stock. If that conversion were to happen, you are talking about 100 billion new common shares outstanding, on top of the current 20 billion authorized. If this is not correct, someone please set me straight.
Plus, we now have a dividend as of 28 April, which will effectively double the current 2.4 billion shares outstanding to about 4.8 billion. Just for the sake of argument, I'm not counting the 15 billion in restricted shares issued to management already.
So what we have is a company that supposedly has a shareholder value of $10 million, divided by potentially 120 billion shares. Best I can tell, this works out to about $.0001 per share, which is about where we are now.
If the above calculations are correct, then I think the current share price fairly accurately reflects the current market value of the company.
As I have said before, getting those 8 new wells going in Wyoming should put FNRC back into the black, especially with the current higher price of natural gas.
However, what will really do something for the share price will be to start drilling in Ohio and then to get a producing well.
Keep in mind that FNRC has $14 million in restricted cash on its books now, along with a $7 million line of credit. I think the $7 million is being used primarily for the Ohio well with the new $2.5 million going mostly toward getting the 8 new Wyoming wells up and running.
But the dividend for shareholders was a nice surprise. We get 1 class E share for every 100,000 shares of the common currently owned as of 28 April. It appears that each of those class E shares can convert back to 100,000 new shares of common stock in 6 to 12 months, effectively doubling our current holdings. Plus, by then, we should know something on the Ohio project.
Good luck and if you or anyone else can shed some light on what is going on with the shares, I would appreciate reading about it.
Good luck,
Cropduster
Deanerys, I did a little research, so let me try to answer your question about how long it will take FNRC to get 6.9 bcf of gas from the upcoming 8 wells that it has a 100% interest in.
Once all 8 wells get up and running, it looks like total production could be anywhere between .7 and 1 bcf of methane gas per year, at least initially. After the dewatering and stable production stages, production drops off in the decline stage. Just a guess would be that it could take 10 years or longer to secure the 6.9 bcf that Mr. Norris is talking about for the 8 new wells in Wyoming, if all goes well. I believe the first of those 8 wells has already been drilled and should come into production soon.
Here is a link to read more about coalbed methane production:
http://en.wikipedia.org/wiki/Coalbed_methane
My take is that the Wyoming coalbed methane operation has the potential to get the company back in the black, providing the 8 new wells come on line in a timely fashion. But, the rocket fuel that FNRC really needs for the share price is for FNRC and its partner to start drilling in the Utica Shale of Ohio and hit oil. Considering the fact that FNRC and its partner have already purchased 40 acres for the drilling pad bodes well for good news later this year.
Cropduster
Daenerys, not sure how to access the stickie post you asked me to read. Maybe it has something to do with me not being a paying member or the fact that I am on still on the 3 post probation for new members. Anyway, if you want to, go ahead and ask your question and I will do my best to answer it right here. I now have 2 messages left for today, which is plenty :)
Cropduster
Thanks for the welcome, Daenerys. I do remember that we talked before. Good to be on this board now. This seems to be where the action is concerning discussion of FNRC.
I bought into FNRC on the way down from $.0011 and now have what I consider to be a significant number of shares at an average of $.00035, so I start making money here as soon as we get to $.0004. I know many others have lost money on this stock and I feel sorry for them, because I have been there and done that with a stock, namely Dynegy some years ago.
Anyway, it seems that FNRC has stabilized at this level and that we are simply waiting on news from Wyoming and/or Ohio. In the meantime, best I can tell, FNRC has about $20 million on liquidity, which is composed of about four categories. $14 million in restricted cash, $7 million in credit that seems mostly dedicated to the venture in Ohio, revenue from the 42 wells in Wyoming, and a limited amount of cash. In any event, it just seems to me that the company has enough financial options to allow it to make it until we see additional developments in Wyoming and Ohio.
I probably would not like this company if I had ridden it down, so I understand the negative sentiment some have about the company, but most of us are here now to ride the company back up, or at least up to the top of the next hill.
Have a good one.
Cropduster
Oops. Typo. I meant to say that we go higher than $.0020 if and when we get good news on Utica, not $00.20 (even though 20 cents would be nice, but not likely to happen with 20 billion shares outstanding).
Cropduster
Howdy FNRC posters. First post here. For what it's worth, here is my opinion of FNRC:
I do not think the company is a scam, even though it does appear to have significant financial problems, otherwise it would not be selling for $.0003.
It has 20 billion shares authorized, most of which have been issued, but 15 billion of those went to the CEO and one board member as restricted stock and apparently are not included in the float. I would like to know what the restrictions are. Apparently the 15 billion shares were issued to stop a takeover attempt by someone familiar with the company. This is evident if you read back through some of the quarterly reports.
The company says it has a shareholder value of $10 million dollars, which, if true, would equate to a share price of $.0005 if all 20 billion shares are included, or a share price of $.0020 if only 5 billion of the 20 billion shares are used.
So what we have is a company that has already been diluted to the maximum. But when you get right down to it, what really matters is how much each share is worth compared to the shareholder value of the company. I fully expect a reverse split after the company gets going with the Utica venture.
If we get good news on what is going on in Wyoming with the methane wells, then I would guess that we drift north to something in the $.0005 to $.0010 range. If and when we get good news on the expected drilling in the Utica Shale of Ohio, then I think all bets are off and we definitely go higher than $00.20.
We are all waiting on the April update, which has not been posted yet by FNRC. My guess is that it is because something is wrong - or because something is right and FNRC wants to get more information before making another operations and drilling update.
Good luck to all those holding FNRC stock,
Cropduster