is working (too hard) for a living
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In terms of structure of financing -- the Sure Capital Agreement, attached to the 8-K, is quite clear that in addition to interest, a percentage of the gross profits will be paid to the note holder.
But to your point, the exact details are never final until financing is done -- but it would appear that we agree that giving up equity/gross profits in return for financing is acceptable, given the potential returns if commercial oil is struck.
The reason I think it will be required, is that EEGC does not appear to have the assets to secure a loan; note that the company is valued at under $10M, with its sole visible asset being a leasehold which (a) has a 2% chance of being commercial, per EEGC's consultants; and (b) expires eight months from now. Other posters have spoken about its rights to certain flare gas technology as an additional asset, but (a) the company only has an option to acquire those rights (at least per PRs; SEC filings don't even show that); and (b) it will apparently take an additional $300M to develop and market that technology, per EEGC PRs.
Further dilution will be required to obtain funds. The Sure Capital financing agreement involves 'dilution' -- not in the form of giving up additional shares, but in the form of giving up a percentage of gross profit.
A similar result will happen when the required JV with a gulf oil company is formed.
Note the SmartWin transaction would have given up half of the company (albeit at a much higher valuation).
And if funding eventually comes from a source other than Sure Capital (IMO, that will be necessary, as I don't think EEGC can provide Sure with sufficient collateral to enable the 'principal protected' notes that are Sure's business model), dilution will be required.
But that's OK; I agree with an earlier poster -- half a loaf better than none, which is where we stand today.
For the Mr. Bendall issue, two points:
- It was a 'no brainer,' IMO, for him to convert the debt EEGC owed personally to him. to stock. This debt comprised salary he had not taken for at least 2.5 years, plus funds he had advanced to the company to keep it alive. a 'no brainer' because the company would not be able to repay the debt unless oil is found, in which case the stock will be worth more than .07.
- This does not explain the debt which he (and other directors) took on which was not owed to them at June 30, per the company's 10-Q. Would have to know much more about those somewhat mysterious transactions to comment on them. Perhaps when the next 10-Q (or 10-K) comes out.
Rallies?
PPS was .15 - .30 from 2005 - 2008, and has since fallen to the current level as SmartWin (funding) and Hunt (drilling) fell apart.
There have been some short term bounces in the process, due to EEGC PRs which so far have not played out: Mr. Bendall's $50M LOC to be devoted to the cause (sure, it is 'his business,' but it was part of an EEGC PR); RO to raise money for drilling; Sure Capital financing; and Grand Monarch Holdings (twice, for that one).
But most posters are here for the long term - even the 'bashers' -- and so short term rallies are irrelevant.
'Show me the money' (in the EEGC bank acount). Stock will jump. Actually drill, some more; and strike oil, much more.
But, need to start with cash to buy the rig and pay the crew. So far, not here. We are two months from EEGC's most recent projected drilling start, 8.0 months from Bellevue lease expiration -- and silence.
Other than the published opportunity to sell $3M of medical waste technology to Africa, and to provide EEGC affinity credit cards, both subjects of recent PRS. Folks, no meaningful dollars for EEGC in either activity, what is the point of even discussing?
Other than to distract attention from the failure to capitalize on the $3B (per Mr. Bendall) opportunity
Hopefully, better news tomorrow.
In addition to being a bumper sticker, would look great on the pending EEGC affinity credit cards.
Well written. That's the nature of wildcat/exploratory versus development in a proven field.
I can certainly accept that my shares might go to zero because there is no commercial oil; it is harder to accept not even drilling, particularly after all of the PRs and abortive funding efforts of the last few years.
Fact is, the zillion dollar question remains as it has been as the shares have gone from the teens (my purchase price) to .02: who is going to fund the drill turning, and at what price (percent of gross profits per Sure Agreement, JV with a gulf-based oil company, etc).
As someone said, half a loaf is better than none; but, we need some heat in the oven (dollars in the bank).
On the 6th, Mr. Haftel said they would be there 'in a week or so'; the second business week since that forecast has two days left, I hope it is accurate.
Value of the stock, post successful drilling, will, among other things, depend upon how much of the profits are given away to obain financing; if financing is through Sure, by Agreement a so far undisclosed, and perhaps so far unnegotiated, percent of gross profits will go to the note holders.
I suspect that the happier the note holders are with the collateral behind 'principal protection,' the lower the percentage. But visa-versa.
Could well be you are right, that most of the $12M is commissions for placement. But then, why put in a PR?? 'Standard stuff' like this is not normally in a PR about financing, at least I have not seen it before.
I would personally be more interested in the PR discussing anticipated timetable for the financing.
Your 6 Sept post indicated funds in the bank 'within a week or so,' we are getting to the end of that period. Your forecasted timetable is required to support rig order and the announced November drilling date.
The insurance cost (together with PPM preparation costs, and management fees for Sure) are part of the $12M, per the company's PR. The question is the source of the $12M. You believe it comes out of the gross proceeds of the first note, I do not.
I do hope you are right.
Don't forget EEGC affinity credit cards and distribution of medical waste technology into West Africa.
Mr. Haftel, I believe you are mistaken.
You say the company does not have to come up with $12M, but this seems at odds with the company's 3 Sep 2010 PR:
All of those items would be great to see in a PR.
For me, I'd be satisfied if the next PR simply advises the source of the $12M required (per recent EEGC PR) to enable Sure to begin the process of selling the $180M in 'principal protected' notes, from whence the first $45M would come.
Team --
Reporting accuracy or deficiencies are the least of our problems as long term shareholders (unless we have bought stock based on disclosures or PRs).
Of greater import:
- Do we exist (the Hunt-initiated GSLM wind up request, in court as we speak, no news that I have seen); and
- Ability to gain funding (on a reasonable financial basis) so that we can determine if Bellevue holds commercially producable oil reserves and, if so, that we benefit.
I worry most about the latter, although an unfavorable result on the former could render the question moot.
Dale, not sure your point.
I answered Crazyjoggers questions of me, best I could -- and agreed with him on two out of three!!
Meanwhile, we are now ninety minutes into Australia court time, any news?
To answer your questions:
1. Wind-Up. Agree, don't know what judge will do, and I do not believe I ever have said that I do.
2. Other Businesses. I don't know anything about EEGC selling 35M shares of Grand Monarch Holdings (link, please); but what I was trying to say is that unless the oil business is going away (which it would if a GSLM wind-up order were issued), IMO EEGC should stick to it. Mr. Bendall, CEO, only has so many hours in the day and IMO they should be focused on oil.
3. JV. I guess I was misunderstood. I agree with you, 1/4 of a loaf better than none. Indeed, with the SmartWin transaction, EEGC was selling half the company at $25M or $45M valuation (forget which), and I had no issue with it.
Sorry that deal fell apart for whatever reason; the deal we get now, if we get one, will be nowhere near as good fore shareholders.
As a holder of many EEGC shares, I would love someone to write a check before GSLM is 'wound up.' Hopefully, the company will find some way to dodge today's bullet.
I admit to not being optimistic on EEGC's ability to raise money, for example the $12M suddenly needed for the Sure financig and I am frustrated with the quality of the press releases and current management direction.
It is not at all clear to me how being a distributor of medical waste equipment in West Africa will help drill Bellevue; distribution is low margin, and I know from other business experiences that getting cash out of West Africa, even when you have a contract, is a slow and painstaking business.
Similarly, I do not believe that the issuance of EEGC-affiliated credit cards will lead to fame and glory.
As I have previously stated, IMO the only way we are going to determine if Bellevue has oil is to enter into a JV with another oil company -- and this JV is likely to cost 75%+ of the company (or gross margin -- I'm guessing the oil company will be equally uninterested in medical waste equipment and credit cards).
But maybe EEGC is entering into credit cards and medical waste equipment distribution so it has a 'raison d'etre' post GSLM. Don't know -- but do observe that those PRs came the same week as the Hunt request to wind-up GSLM -- filed in June, but not disclosed by EEGC -- was publicized.
Mr. Callaway undoubtedly thought that EEGC's geology looked positive, and thus he joined the company.
However, Mr. Calloway's thinking does not make commercial oil a fact any more than a divining rod or a vision from God.
RPS Energy -- EEGC's contractor, not the contractor of 'bashers' -- took the geology prospect by prospect, and analyzed all of the factors which go into creating a commercially viable oil reserve, and came up with 2% 'probability to disocver hydrocarbons in a sufficient quantity for them to be tested to the surface' for Bellevue(Executive Summary, page 2, Table 2). Bellevue is the largest prospect -- well over half of the potential oil -- and 2% is the highest probability of all the prospects, by far.
But, 2% is not 20% or 50% or 80% -- thus EEGC's difficulty in getting finance at a reasonable price. Even Sure-placed notes, if they happen, involve giving up a percentage of gross profit.
2.5 months later, EEGC has not explicitly announced the result of the Sure due diligence required by their Agreement, although the recent PR speaking of the need for insurance for the notes may be an implicit statement that Sure wasn't satisifed that the collateral offered (the lease?) would provide sufficient protection for $180M of 'principal protected' notes.
In an earlier post you spoke of an EEGC FAT CAT writing a check to Hunt -- hope that happens, we are four business hours away from the hearing. While I am sure there is some brinksmanship strategy involved, that is uncomfortably close and meanwhile we are burning legal dollars.
Not sure the point of your argument.
I have two points:
1. Getting started. Need to get the rig ordered and the first wells drilled asap, should not stand on ceremony of waiting for the full $45M if $20M is available. IMO, anyway. Clock is ticking on the lease.
2. Cost of Capital. As shareholders, we want EEGC to be sensitive to the terms of money raised as that affects share valuation.
In particular, capital raised for 'wildcat' purposes (Bellevue today) is a LOT more expensive than capital raised to drill additional wells where reserves have already been proven.
The Sure Capital notes cost interest PLUS a percentage of gross profit. If reserves were proven, the percentage -- if any -- would be a lot less because the risk is lower.
Also, at some point the cash flow from the first wells can be used to pay for additional wells.
The $2B+ valuation for the current leasehold comes from the expected amount of reserves -- 400M+ barrels -- times $5 per barrel which Mr. Bemdall says is the value at which reserves trade in Australia.
I can't speak to the accuracy of the $5, and don't know if that price is for proven reserves, unproven reserves, or whatever. In this case, we have undiscovered reserves, so not sure of applicability of the $5 figure (other posters can advise).
But, the $5/barrel 'net' by definition takes into account the cost of production.
The problem with that valuation method for me is that it does not take into account all of the factors which have to line up to create commercially viable reserves. These are all discussed in the RPS Energy report in detail and 'net out' to a 2% likelihood for Bellevue, and 0.72% for Thunderbolt, the two prospects in the current leasehold.
2% times $2B comes out to $40M -- which is still several times the current valuation of the company. The reason for that is that the market is not confident that EEGC will even get to spin the roulette wheel -- takes money. Per last week's PR, $12M to put the money-raising infrastructure in place before Sure Asset Management can place the notes. And the company has so far said nothing about sourcing the $12M, which is twice the market value of the company.
Seems to me a JV with an oil company would be the best way to raise funds. Should be doable, if the geology is as compelling as everyone says. So what if EEGC has to give away two-thirds of the company, say. Take the projections which Mr. Haftel has provided and divide by three, shareholders would still be very happy.
Note that even with Sure Capital, a percentage of gross profits is given up with the notes, which is like giving up part of the company.
I am aware the bonds are $20M, and that the annual tranche is $45M; indeed, when the $180M announcement was made I mused (post 16128) as to why it would be done that way -- to provide the first tranche, Sure has to place three bonds. How will interest get paid to the lender onn the full $20M, if EEGC only has $5M of the third $20M raised?
Didn't make sense, at least to me, perhaps someone else can explain the logic.
But, these things can always get modified; depending on funding availability, one way to modify may be to provide EEGC with funding as available, so provide the first $20M when available. I can't imagine EEGC saying they won't take any $ until the full $45M is available.
You can drill a lot of holes with $20M.
And, a Bellevue well needs to be completed in the next 8.2 months, per lease conditions.
Perfect wish list.
Just need a few $$$$.
The first $20M tranche of $180M from Sure has a pre-requisite of $12M from EEGC, per a recent EEGC press release.
Source?
Plus, of course, need to dodge the Hunt bullet in Taz on Tuesday; hopefully a postponement so Mr. Haftel's Sept 06 forecast of first Sure $ 'in a week or so' can come true.
More precisely, one business day between now and the scheduled GSLM wind-up hearing.
Mr. Haftel advised last weekend retraction (#17558) is coming:
I know it is hard to accept that there might be two people frustrated with EEGC's drop from .15 when I bought it to .02 today and with the accuracy of its PRs, but in fact Earnest and I are not the same person.
I do agree with you -- everything will be good with financing.
As of September 6, per the most frequent poster on this board, it is a 'done deal,' with dollars in the bank account within 'a week or so.'
I do hope he is right. But based upon my reading of the company PRs, and the new disclosures of what is required to gain Sure financing ($12M, PPM, insurance), I am not as optimistic.
And neither is the market. Mr. Bendall talks about certifying a $2B valuation, but the market has EEGC at less than $10M market cap. Those believing Mr. Bendall have a fantastic money-making opportunity; but less tha $30K of stock changes hands on a daily basis, and the stock has dropped about 50% since the RO 'successfully' completed.
Yes, I think you have the right guy per my parallel research.
But, what part of Mr. Villarreal's background is appropriate to raising finance for an oil exploration company in Tasmania, more so than the current chairman, Mr. Burnett?
Let's review what we know (please add or correct):
- Grand Monarch's sole objective is to be a reverse acquisition candidate, per their SEC filings. They are described as a 'shell company' on the AUFS website (see next item) and in their own SEC filings (previously referenced by myself).
- AUFS (owned by Mr. Villarreal) owns some of Grand Monarch, per the most recent Grand Monarch 10K; the AUFS website says that as of November, 2009, Grand Monarch was looking into buying AUFS, but nothing since.
I agree with everything you said.
Net: At the end of the day, EEGC needs money to drill, then we can determine if there is commercial oil.
What frustrates me is when the company says, financing is done -- and it isn't.
- Two (three?) years ago, the company announced that SmartWin had agreed to put (about) $5M upfront with an option to buy 50% of the company at a .25/share valuation (10x today's valuation), and it didn't happen. EEEGC is apparently in litigation with them.
- A year ago, Mr. Bendall said he had a $50M LOC which could be devoted to EEGC. Certainly it is Mr. Bendall's decision as to how he spends his resources, but then why do a PR if it wouldn't be devoted. Or it didn't exist? Certain optimistic posters said it was just a 'matter of time'; but one year?
- With the RO, EEGC was going to raise cash. But a $9M RO resulted in less than $100K of cash, in all likelihood not covering the out of pocket costs of the offering.
- An EEGC PR was put out, with the headline 'SURE Capital issues up to $180M in notes' -- while $0 falls into the 'letter of the law,' hardly in the spirit when no notes were issued, and still haven't been two months later. Indeed, likely following the EEGC-paid due diligence, Sure has determined that insurance is required. Who will fund the required $12M, and who will insure the notes so that Sure can issue 'principal protected' notes?
Net, I am frustrated about EEGC's ability to raise capital to drill, meanwhile the stock has dropped 80% since I bought it and now EEGC will be in the flare gas nanotechnology business (to which the company has no rights, only an option) and the vanity credit card business, and then use this financial services and oil expertise to sell medical waste equipment in West Africa?
Net, I bought into an oil exploration company -- indeed, believing Mr. Bendall's vision (at least the geology) -- and nary a well drilled to completion. Indeed, since I invested, RPS Energy has said that the net of what appears to be impressive geology, is just a 2% chance of commercial hydrocarbons.
Speaking about a now-deceased director is not effective for me. NO big money has poured in. As you suggest there might be a 'bunch of people willing to take a chance on EEGC with big bucks,' but so far they are hiding; and meanwhile, Hunt has filed to shut the company down due to lack of payment.
Should be an interesting week upcoming.
I don't think it is a good idea for anyone to believe everything that a poster says based on the poster's identity.
IMO, posts should be evaluated based on the evidence. What makes sense in context of the information and analyses presented?
For my own posts, please argue with my interpretation. And for sure, if the data I quote is inaccurate or out of context, point that out and I will agree or not as appropriate.
But do not attack my motives, personality, or iHub experience. Those are irrelevant, really, to the informative accuracy of posts.
But for those who want to know -- I bought stock at .15/share based on a (too) quick reading of EEGC PRs. I have since learned to evaluate PRs (and now posts) based on a full evaluation of the information, and don't want anyone else to fall into the same trap. If they did, they could be potential plaintiffs against the company, not a good thing for anyone.
If you believe the recent posts that funding is a 'done deal' and the first tranche of the $180M of Sure developed funding is imminent within the next 'week or so' (as of 6 September, per one poster), then take an extra mortgage on your house and use it to buy stock, because if this is in fact true, EEGC pps will skyrocket as I have previously agreed.
PPS will skyrocket because stock market does not believe this will happen (<$10M valuation versus Mr. Bendall's belief of $2B+ valuation -- or even versus an 'expected value' lease valuation of $40M, before gross margin is allocated to Sure investors per the funding Agreement), and neither do I -- again, based on the company's own PR last week which was unusually clear in new disclosures of critical pre-requisites for Sure funding ($12M of 'upfront' cash from EEGC, PPM, insurance policy).
Look forward to contrary evidence as to why near term funding should be expected other than 'it would be a good thing.' I agree with that statement -- but it is not evidence. Where is this $12M to come from? At current common stock valuation, this is almost double the value of the company!! So, raising it would be significant dilution if equity -- and debt is unlikely given that all collateral has to be available for Sure so they can offer 'pricipal protected' notes.
In particular, advise of any other evidence of predicted funding presented by the company or its CEO in the last two years which happened other than SmartWin (50% of the company at a $0.25 valuation -- which happened partially but was not completed for whatever reason, I do not have sufficient information to blame SmartWin or EEGC, resolution of pending litigation should resolve).
Stock is down almost 50% since end of the RO less than six weeks ago. Anyone who believes Sure funding is imminent, believes posters other than me; those who believe me are likely holding (as I am), as the current value is fair compared to the prospects (Monarch, Tasmania oil and gas, flare gas technology ).
Net: Bet your beliefs with your pocketbook.
On the other hand, the Grand Monarch acquisition will give us a new Chairman, per the PRs -- but does anyone believe he has a magic wand?? Based on what history?
BTW, what is the purchase price and how will the Grand Monarch acquisition be financed?
I certainly hope that Mr. Haftel's last week posts about financing being a 'done deal,' and the September 6 post about the first part of the $180M in Sure Asset Management financing being in EEGC coffers within 'a week or so' are accurate. Should get feedback on those pretty soon, hopefully prior to the hearing. Maybe the hearing can be postponed to allow for the 'or so.'
I won't try to go back and analyze the accuracy of past posts, too many. I would observe that the one 3 September about Hunt Energy 'retracting' their request for wind-up turned out not to be accurate -- the advertisement appeared on the 7th. However, perhaps that was semantics -- we certainly all hope Hunt and GSLM can resolve their differences before the September 14 hearing, four business days from now so that Hunt can then 'retract' their request for wind-up.
It is also useful to recall that Mr. Haftel has said in the past he does not have 'inside information,' so we should not expect complete accuracy in posts about the future.
For myself, I base my posts on analysis of the company's published information, combined with personal business experience. I post when I see inaccurate or illogical analysis; important we be grounded.
With the wind-up hearing scheduled for the 14th, certainly hope there is news related to a Hunt agreement in advance of that.
The question as to whether the liquidator can 'sell' the license, such as it is (Bellevue must be completed in 8.3 months), is a crucial one.
- If not, forcing dissolution only gives Hunt revenge, the company (GSLM) has no other obvoius assets (if they did, they would be 'hocked' to find cash to drill.
- If so, Hunt should stand a reasonable chance of getting their money back. The EEGC (and I'm assuming GSLM) balance sheet has been cleaned up substantially by the RO, with over $9M taken off the books by Mr. Bendall.
Mr. Bendall puts the value of the Bellevue/Thunderbolt lease at $2B+; even at 2% likelihood, those interested in gambling would value it at $40M. And 10% of THAT number would pay back the remaining debtors, including Hunt.
Since going to court will cost Hunt money, and arguably negative publicity in Tasmania/Australia, it would seem logical that the liquidator can somehow monetize the lease.
Maybe there is a poster who knows for sure?
This is certainly a complex situation.
Note that Mr. Bendall has previously been open to personally guaranteed payments to Hunt Energy. From the 2009 10k:
Mr. Haftel, you are right -- that is exactly how Hunt versus GSLM should turn out.
The key -- as it has been for the last several years -- is that EEGC must come up with dollars. And after two years, Hunt's patience is likely wearing thin.
There has been speculation that Hunt would not even want the lease. I think they would prefer to stay in the drilling business, but given the choice of nothing or the lease, they would choose the lease as they DO have the resources to drill.
And with an expected value of $2B plus for Thunderbolt and Bellevue by Mr. Bendall's calculations, $40M by mine (due to 2% likelihood of commercial volumes per RPS Energy), the lease is better than nothing.
I would think that giving Hunt a percentage of the company might be the compromise -- but hasn't that already been tried? And then, what about the other debtors?
The key things to know from this advertisement:
- It was in the paper on September 7th, although some posters believed that a retraction was coming from the advance news reports on September 3.
- The request for wind-up was actually filed in June -- arguably part of a negotiating stance. It is somewhat surprising to me that it was not disclosed in the Q2 10K (filed in August), but perhaps not required if the advertisement had not been placed; shareholders were already on notice about litigation by Hunt.
- The hearing is currently scheduled for September 14 at noon.
Net: looks like the story won't be retracted -- it is true. The hope is that Hunt withdraws the request as the result of negotiations with the company.
It may not be coincidental that the recent flurry of company initiated press (two PRs last week, and the article over the weekend about the 'financial crisis' impacting financing activities, and showing a picture of the six Hobart employees) appeared at approximately the same time as the advertisement. Company attempting to demonstrate commitment to finding funding so that Hunt can be paid back, thus gaining public sympathy.
BTW, the weekend article implied some slight of hand by the company in its filings, by saying the report shows $216K in salary for Mr. Bendall but Dr. Burnett says no money paid. Not fair to the company. Accounting rules require accrual of salary, even if not paid in cash. The filings also say that Mr. Bendall received no cash in 2008. 2009, and so far in 2010 (amount owed was converted to stock in the first round of the RO).
Well, it is easy to see at least one thing wrong with this quotation, which would require retraction:
I agree with your comment:
We should be sure to keep our facts accurate as we discuss EEGC's prospects.
The following is not accurate:
Mr. Haftel --
EEGC apparently does believe it owes Hunt at least some money, per the 2009 10K filed in June 2010:
Should have done more research before posting.
I have now read the GMH 10-Q for the period January 1, 2010 through March 31,2010 (the 10-Q for Q2 has not yet been filed).
Unfortunately, there is no significant 'new news' in that document, at least that I could find. No mention of the proposed acquisition of AUFS reported on the latter's website. And there is repetition of the business objective, to be a reverse acquisition candidate.
Strange.
I'm for whatever allows EEGC to drill Bellevue before the lease runs out, to see if it is commercial.
So, it is worth understanding more about Grand Monarch Holdings and whether it can help. For those interested, I recommend reading its most recent 10-K:
Batting --
EEGC only has a lease on two of the twelve prospects (Bellevue -- 2% likelihood of a commercial well) and Thunderbolt (0.72%, percentages per EEGC's consultant, RPS Energy, as posted on the EEGC website), so we should not be expecting twelve holes.
Although, if EEGC is actually able to drill those two holes and find commercial quantities of oil, likely they will have the opportunity to drill the other ten.
Frankly, most of us on this board would be highly satisfied to see just Bellevue drilled while the lease is in effect -- 8.6 months and counting down.
Just because 'EEGC said,' doesn't make it so. Consider the title of the July 9 press release: