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Everyone is eagerly looking forward to seeing the results of just the first well drilled to depth and completion with commercial hydrocarbons, then good things will happen:
- Much higher stock price.
- Much cheaper financing for the long range drilling program.
Just one question: is there a current forecast as to when that will happen? Right now, the company only appears to be projecting the drilling of a shallow well with rig and contractor mobilization in November.
I agree with another poster that the objective of such a well could be to show at least some positive results so as to reduce the cost of financing (perhaps through a higher stock price, if equity is sold or shares are used as collateral), which if achieved is fine with me, given the current difficulties in fund raising.
Can you share the $/bbl, number of barrels, and percent of gross margin to be given to Sure (amt not specified in the 8-K, just that there would be some), that led you to your pps conclusion in the two cases?
My speculation is that the $20M is to fund the various items, so the prospectus may not exist yet.
And TBH, it is very common to be lining up funding ahead of a formal prospectus being available, so the travel doesn't bother me at all.
Note that an 8-K was filed on the Sure funding back in July, don't know if there is a need for another one at this point.
Anyone know what the 'conditions precedent' are, related to the Sure funding, for which the $20M LOC is required?
My speculation is that the funds will pay for the items discussed in the September 3 PR
Crazy jogger -- I'm advising what I think will happen, not what I want to happen.
BTW, neither is based on my .15 average purchase price, but rather on my analysis of the facts. Higher is always better than lower (at least for longs), but wishing doesn't make it so.
We don't know who GMH bought the rights from, could have been Mr. Bendall!
$250/share might be a bit high.
Mr. Bendall himself uses $5/barrel which he has described as the going price of 'in the ground' reserves in Australia.
Using the $5, he has $2.3B in value for Bellevue/Thunderbolt, and $3.3B for all of the locations. With almost 500M shares now outstanding as a result of the recent RO, that translates to $5 - $7 per share, once the reserves are confirmed.
This number could go higher if oil price goes much higher (certainly possible, if one believes the peak oil folks), or lower (if a percent of margin has to be given up in return for financing).
And yes, such valuation would be a significant enhancement over today's value!! Indeed, I would expect stock price to double when there is money available to drill -- again assuming a reasonable 'cost' of that money.
Excellent comment -- since EEGC is apparently going shallow with this first attempt, perhaps they might even use the Spaulding rig??
There is risk in this 'shallow' strategy, if the most shallow pay zone is not there -- but at least it moves the ball forward, and would likely substantially reduce the cost of financing if commercial oil is found. I don't have sufficient knowledge of the geology of the various zones to evaluate the decision, but this feels like the right strategy.
However, previous comments about posters believing that GEFCO would be used because 'they didn't do their research' are inappropriate. Consider the 3 Sept PR as the only source of public information of which I'm aware (anybody have a different source?) (GEFCO added to the quote by me, in context of previous quote in the PR from GEFCO):
It is fascinating that Grand Monarch acquired the flare gas technology rights, rather than EEGC. It will be interesting to learn from whom they acquired them, and at what cost. If it had been EEGC acquiring from Mr. Bendall, it would have required a related party transaction disclosure. Not sure if that requirement still applies if the rights were acquired prior to finalization of the acquisition.
Agree with your concept that iHub readers should read and evaluate recent EEGCPRs (your posts 18806 and 18824) as an indicator of future events and EEGC credibility.
September PR committed to drilling in mid-November; still a couple of weeks to go, don't know how it will turn out, do you agree we should use what actually does happen, as a way to evaluate EEGC PR credibility?
If not -- please suggest an alternative litmus test.
Nope, don't have to read this board, all they need to do is (a) put money in the EEGC bank account; and (b) drill.
I hope you are right, that they will come through, BUT since they have (absent the first item, in the last six months alone)
- spent $50M without completing a well;
- raised no money from a Rights Offering, but somehow enabled 50% insider dilution through assumption of debt not visibly on the published balance sheet;
- increased board size and advisor count by a large amount, again increasing expense;
- announced an apparent diversification program by announcing (but in fairness, not yet completing) acquisition of a company (Grand Monarch Holdings) ostensibly (but not per GMH SEC filings) in the affinity credit card and west africa waste treatment equipment distribution businesses,
- and published PRs saying
(a) Sure Capital has issued up to $180M in notes (admittedly, $0 raised does make that a factual statement -- but we weren't supposed to read that way); and
(b) drilling would begin by mid-November, with a purchased rig,
these folks are unfortunately currently lacking in credibility with respect to drilling for oil, 'guilty until proven innocent' if you will.
When drilling begins, I will be as quick as possible to offer congratulations. Meanwhile, we have only the track record to ponder.
Can't wait too long -- seven months and counting on the lease, and the rig hasn't even been ordered yet.
As I earlier noted:
On the one hand, the bar is not set too high when we speak of Mr. Villarreal 'helping the BOD.' $50M spent, no wells drilled to completion, food businesses bought and sold, etc.
On the other, he arrives as a result of the proposed acquisition of entities in the US affinity credit card, medical waste technology distribution, and mortgage businesses which do not suggest obvious BOD skills for a company in the Tasmania oil and gas exploration business.
And, consolidating the other thread, his central US political and union skills do not seem helpful in obtaining NA gas flare technology business (mostly gulf and south based) -- assuming of course that EEGC was in such business, BUT (ok, boring for me to keep restating, but doesn't seem like it has registered) there is no evidence of EEGC having any rights to such (competitive) technology, and even if it did, it is a long way from market if it requires $300M to commercialize.
Net: IMO, Mr. Villarreal is only helpful if the company decides it is in the new businesses, not oil and gas -- a self-fulfilling pronouncement absent additional funding. Maybe some foreshadowing here?
Meanwhile, the stock is back at pre-Sure Capital announcement levels; hope no insiders have sold in the interim.
Political and union contacts in the US are not EEGC's greatest need -- or logically of any use, except maybe as holders of affinity credit cards.
We need someone with financing/oil company contacts. One of the new directors had in his bio that he was on the board of a company which lends to start-ups, perhaps that will help.
Meanwhile the biggest news of September 28 PR for those of us interested in oil and gas exploration, not affinity credit cards, distribution of medical waste technology to West Africa, or US residential mortgages, was that the EEGC management team was headed to the middle east to secure its financing. The market actually saw this as bad news, since the early September PR speaking of mid-November drilling was suggestive of financing in place (since a rig had to be ordered that same week to achieve mid-November).
Hopefully, some positive results from that trip in the very near future -- would be a VERY pleasant surprise for the market, as the pps is not expecting significant positive news.
Meanwhile, about seven months till Bellevue lease expires.
Yes, if you believe that they will get financing, buy a rig, and drill -- you should buy as much stock as you have cash or can borrow, as that opinion is not held by the market as a whole, as reflected in a very low stock price and market cap.
Unfortunately, the company does not have credibility for its claims. There has been discussion on this board of 'pre-sold' notes through Sure Capital (back in July), and on Sept 6, cash to be in the coffers 'in a week or so,' with these claims intimated as having leaked from the company.
In fairness, can't hold EEGC for those posts, and they don't appear to have influenced the market, which has dropped more than 50% since the RO collapsed with no cash, just heavy dilution in return for insider assumption of mostly undocumented debt.
HOWEVER, can certainly hold EEGC accountable for its early September claim that drilling would begin in mid-November.
It has now been more than a month since we have heard from the company -- or was that a mirage, the PRs are not posted on the company website. Perhaps management is spending the time readying announcement of affiliated credit cards. Although, with almost 500M shares now oustanding, will take a lot of cc to move the needle.
Crazyjogger. You are saying:
The recent stock high (2008) occurred when oil was nearing $150/bbl (and drilling imminent, with financing in hand), so valuation is certainly affected by pricing.
Just a mere matter of drilling more than 1000 feet.
The graphs show that flare gas technology can add value.
But, as EEGC shareholders (and feel to correct any of the following assertions, but please do so with links):
- We currently have no rights to any such technology.
- We have an option on rights to so-called flare gas technology, but:
1. There is no evidence that Mr. Bendall, who a year ago offered to enter into a commercial transaction with the company, has any rights; and
2. If existent, there is no evidence that Mr. Bendall's referenced technology has any competitive advantage versus that which is currently on the market, or in development; and
3. There is no evidence that anyone is willing to invest $300M to commercialize said flare gas technology.
I am guessing that the current market value of the company includes $0 for flare gas technology, so if you believe it is 'real' -- please buy a lot more stock, you could make a bundle.
For me, I believe the market has fairly valued the present value of the risk adjusted future cash flows at zero -- or perhaps at a negative number due to its distraction from the company's stated mission: discover oil and gas and bring it to market.
That is the BIG if:
The Sure Capital agreement (in the 8-K) does talk about giving up a to be determined percent of gross margin in addition to interest.
The problem with Sure Capital, of course, is that they only offer 'asset protected' notes, and EEGC has no assets that would fit their model in terms of funding $45M, much less $180M.
It was the company which said it would take $300M to commercialize the technology, I equate that to a long time fuse for a company which has less than ten employees today. Takes a long time to spend that much money unless you are buying airplanes or ships.
IMO until the technology is in fact patented, which appears to have a ways to go with an initial unfavorable report as discussed elsewhere, it will be hard to find someone to invest that amount.
wshaw, great observation:
Well, that may be all you care about.
But the rest of us care about share price, and this gentlemen's apparent expertise in that area will not matter unless EEGC has rights. Which they don't today.
And EEGC is not just being 'given' the rights, per the 2009 PR it will be a commercial transaction.
And rights will only HELP the share price if EEGC is able to commercialize them; and if this is a $300M project (almost twice as big as exploring for oil), it will obviously have risk plus a very long time fuse (takes a while to spend that much money).
Would not expect a share pop immediately, if rights were obtained; maybe some if funding was also obtained, and the commercialization time table and EEGCs ability to hire the right resources were clear.
Last summer's PR on flare gas technology merely said that Mr. Bendall had decided to 'offer' North and South American rights (if I remember the geographies correctly), and that a study was being done to serve as the commercial basis for those rights.
This summer's PR discussion simply said that EEGC had an option on the rights, but that is different than having the rights themselves. Must be a commercial negotiation for that to happen, and there would of course be a filing, since Mr. Bendall, who was offering the rights, is a related party. Could be the terms have been negotiated, with financial ability to commercialize being one of the pre-requisites.
As I posted when the $300M commercialization price tag first showed up: presumably, if EEGC spends that money to commercialize, they should receive consideration of some sort for any sales outside of NA/SA, the location of their rights.
I have NEVER claimed knowledge about oil (if you disagree, point to the post and I will correct).
I have NO such knowledge, other than what I read in the RPS Energy report or EEGC PRs, and then simply quote.
To the best of my knowledge, none of my posts have been factually refuted -- just comments made about my 'motives.'
For me, just 'keeping it real,' do not want to see other investors misled by inappropriate PRs (as I was) or posts based on 'wannabe,' not facts.
It is my belief that this board is to exchange data, and analysis of published data, not to 'pump the stock.'
I will be the first (subject to time zones) to congratulate the company on favorable financing. When will that happen? Sure Capital financing was announced more than three months ago, and there were assertions by one frequent poster that the notes had been 'pre-sold,' but nothing factual has happened since, despite a post more than three weeks ago that cash would be in the coffers 'in a week or so.'
We are all waiting for financing; should it show up, pps will double at least, I agree. But current pps suggests the market as a whole is not optimistic.
IMO, the reason that EEGC is 'undervalued by 400%' is because the market does not believe they will find financing -- or, if they do, it will be with high dilution.
Should financing appear at a reasonable dilution level, I would expect pps to 'pop' to $.05 - $.07. There will still be a 'risk' factor applied so pps may not get to 'double digits.'
Batting, I have already posted on the quality of EEGC PRs, and your only response was, 'Your intent is obvious.' You didn't disagree with any factual assertion I made.
But, let's suppose the issue is still open. The most recent PR said drilling would happen in mid-November; shall we decide our debate based upon the outcome of that single commitment?
As it is end of September and the rig is not even ordered (at least, per publicly known information), and the money promised by Mr. Haftel on Sept 6 to be arriving 'within a week or so' has not yet shown up (again, per public info) -- I'd make a strong bet that mid-November won't happen.
But, 'time will tell,' we can then revisit the discussion. But I do believe that unfortunately (as I am a long from 2008, based on believing the PRs) the cynics (re the accuracy of forward looking EEGC PRs) appear to have history on their side.
Well, we know that the EEGC research, performed in 2008 by an EEGC consultant RPS Energy, is published on their website and frequently quoted in EEGC press releases.
We know that for all the domes, the mean value of oil, at $5/barrel (number chosed by Mr. Bendall to reflect the rate at which certain kinds of reserves trade in Australia; not sure if EEGC undiscovered reserves fit that model, but let's assume so) would be 3.3B, or $2.2B for Bellevue/Thunderbolt.
However, that assumes the reserves are actually found. We also know from RPS Energy's report that the likelihood of finding COMMERCIALIZABLE reserves is 2% (0.71% for Thunderbolt).
If one applies expected value, by applying the 2% to the $2.2, less a bit for Thunderbolt, we get $40M, or $.08 per share.
That number goes up, if one believes $5/bbl (Mr. Bendall's own number) is too low, and/or that the other domes can be drilled; it goes down for 'risk premium' and if one believes that additional dilution will be required to actually get a well drilled, and commercial oil extracted.
Net, dreams of $25/share ($10B plus valuation) do not make sense.
Or, do we think there is some secret study somewhere that EEGC has not published. If not, what would be the incentive not to publish? Would have been a great way to get more interest in the RO from cash customers, as opposed to those taking on mysterious debt. Or, if since the RO, raise PPS so company is negotiating JV terms from a position of strength.
And the value of issuing affinity credit cards and distributing medical waste technology in West Africa does not make up the difference.
Batting -- Reading PRs is not a strong forecaster of EEGC company performance. Go back for last three years, and see how many PR 'projections' have actually taken place.
You could argue that Mr. Bendall exercised his over-allotment privileges as committed, but if you dig deeper you will find he actually committed cash to that (LOC), but instead 'converted' some mysterious debt not found on the June 30 balance sheet.
If I can find the time, I will analyze all PRs I can find (caveat: EEGC does have a habit of moving some from their website; indeed, as of my most recent look prior to the recent website shutdown, the September 2010 PRs were not even posted).
Immediate 'interesting' ones I can think of, which have not occurred, are:
- Mr. Bendall's statement that a $50M LOC would be used for his execution of RO shares, including over-allotment.
- Flare gas technology distribution rights transfer from Mr. Bendall to EEGC.
- Hunt 'back to work' agreement.
- Sure Capital financing for oil and gas exploration, and flare gas technology commercialization (still could happen, to be sure; but almost three months later, no indication that due diligence has been successful, and IMO the conditions laid out in the Agreement (see 8-K) will be very difficult for EEGC to meet).
- Purchase of a credit card and waste management distribution business (could still happen; BUT, the company being bought, Grand Monarch Holdings, did not even own those businesses as of EEGC's announcement date -- and still doesn't, per SEC filings as of today).
Hopefully, the next PR will contain positive news about EEGC execution, not about intent
EEGC historical pps chart: http://finance.yahoo.com/q/bc?s=EEGC.PK+Basic+Chart&t=5y
The stock was actually in the .15 - .18 range summer/fall of 2008 when oil was over $100/bbl and drilling looked imminent, then plummeted to the .05 level by the end of 2008 when the SmartWin deal fell apart and oil prices dropped.
It was last at .20 at the beginning of 2006.
With 50% more shares outstanding (and much more expensive dilution -- either shares or gross margin -- likely with any financing) and oil prices well below 2008 levels, the price levels you suggest may be optimistic until oil is actually discovered. Although, we would all appreciate the opportunity to test your hypothesis!
Hopefully, one of these Mercury articles will soon be supported by facts, not just increased hyperbole.
I don't mind the kitchen table office (that is where mine is), but I'd like to see a few of those dollars on a rig and crew.
We know this week's PR will not announce a dividend, hopefully it will announce some funding which would of course move the stock off its (per Yahoo's chart) one year low.
Where were all these 'wealthy EEGC investors' at the time of the R.O.? Less than $100K in cash raised.
If they have come in since the qualifying holding date for the RO -- why not lend the company a little spare change to buy a rig and pay a drilling crew for three months?
And, certainly you can't call Mr. Villarreal (GMH) an investor -- EEGC is buying his company, not the other way around.
And why do you keep saying EEGC is in the flare gas technology business? Even the company itself does not claim that, their most recent PR discussing it simply claims to have an option to be in that business -- and we know from the August 2009 PR that Mr. Bendall will put a price tag on exercise of that option. Even if exercised, EEGC won't be in that business until they have raised the $300M to commercialize the technology.
Mr. Trenham's 'stature' appears nothing to brag about, given subsequent posts.
Given what you have now learned, any change in opinion about EEGC management ability to develop quality financing?
Hopefully, not foreshadowing Mr. Villarreal's effectiveness; BTW, anybody have a prediction of how EEGC is financing the acquisition of GMH, when it will close and when Mr. Villarreal will become the new Chairman, replacing geologist Dr. Burnett?
Unfortunately, we will likely have to wait a while for the rig.
The July 2 PR had the following to say:
You say that
Not sure the point of the post:
- If flames are not coming out, then flare gas technology is already in place, don't need EEGC.
- If flames are coming out, then there is a business opportunity for flare gas technology, but that is not the same as saying said flare gas technology actually exists, or that EEGC has rights to it.
Does EEGC have rights to any flare gas technology?
The August 20, 2009 PR says that Mr. Bendall has
I know the offshore license was applied for and rejected; your post indicated it was an EEGC asset which batting should have had on his list.
A buyout clause might well be part of any financing. However, with Mr. Bendall believing Thunderbolt/Bellevue is worth $2.3B (pr PRs) versus current market valuation of less than $10M, I suspect that there might be difficulty reaching agreement on price.
For the moment, I'd settle for simply having sufficient finance to drill Bellevue to completion before the lease runs out in eight months. I think it can be done for less than $45M (one Sure tranche), and less than $20M (one Sure note).