is working (too hard) for a living
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$58K in cash bought less than 1,000,000 shares from 'more than 27 shareholders' (so, $2K per shareholder, including the directors who bought shares). There are still 116,000,000 shares available, requiring $8M.
Kind of an uphill battle, IMO, absent Mr. Bendall's commitment. And that appears shaky to the market, as the PR just talks about directors taking up 'additional' shares.
Note that Mr. Bendall is looking for financing, per PR. Either he is trying to replace a disappeared LOC to meet his commitment; or, the commitment will be met AND, for the first time, the company is saying it needs more than the RO amount to begin drilling (maybe because of more than $9M in debt, with debtors expected to demand repayment from RO proceeds??).
OR, perhaps the company is expecting the RO to fail, and Mr. Bendall is looking for alternative financing, likely at less generous terms to the company than $.07/share. Note at one point 2-3 years ago, SmartWin was going to pay $40M for half of the company; the RO valued half the company at $13.5M, will be interested to see valuation of new financing.
Less than eleven months and counting on required completion date for Bellevue. Time for Clipso to begin his countdown, hopefully interrupted by a gusher.
Sounds like you are confident that Mr. Bendall will meet his commitment, since it is in an SEC document.
While the PR speaks of many shareholders and directors exercising rights in the first round, the fact of the matter is that less than 1% of the desired raise happened in the first round ($58K versus $9.3M). And, the conversion of $1.2M debt to equity was VERY self serving, not at all beneficial to EEGC (see my prior post on that fact, feel free to state how it helps) yet enables certain parties to state that they exercised in the first round.
As a long, I personally hope you are right about the pending success of the RO, led by Mr. Bendall's commitment; as an objective observer, I'd be willing to bet dollars against doughnuts that you are wrong, since the PR has EEGC seeking financing which should not be needed if the RO is successful.
And, judging by market action, I am not the only one of this belief.
Less than eleven months and counting on the lease requirement to complete Bellevue, and the infamous Winter between now and then.
But the Bendall commitment was not in the press release, where previous commitments have been made.
The PR does say, however, that Mr. Bendall and EEGC are aggressively looking for financing -- why, if the RO is planned to be successful? So we can have two rigs?
For sure, any new financing will be far more expensive to existing shareholders, in terms of dilution, than the RO. Combined with the low probability of finding oil, the stock is down over 20% today alone.
The appropriate time to exercise the commitment to buy all otherwise unsubscribed shares is during this second round of the RO.
All shareholders who exercised full rights in the first round can sign up for however many shares they desire during the second round. If more than the full amount of shares are subscribed, then they are allocated pro-rata.
I do not understand how it would benefit the company or the shareholders for Mr. Bendall to wait until after the fifteen days are up, please advise.
With respect to allowing other shareholders to get as many shares as they want -- so far, they have only contributed $58K or 0.7% of the desired raise. I don't think Mr. Bendall needs to worry about staying out of the way of a stampede. And as said above, should there be a stampede, shares are allocated pro-rata.
Perhaps Mr. Bendall wants to invest the minimum amount of cash necessary -- hardly a show of confidence -- but that could explain why he converted debt to equity (no cash cost -- or cash to the company) and is now waiting to see if someone will add to the $58K.
Mr. Bendall, let's get this (drilling) party started. Twenty-three months and counting.
Now that the RO extension is effective, EEGC shareholders eagerly look forward to EEGC's announcement that Mr. Bendall has delivered the necessary paperwork and cash to meet his commitment expressed in both the original RO and the extension.
With only $58K presented by other shareholders in the first round, it is unlikely they will pony up the available $8M, so EEGC will depend on Mr. Bendall and other members of the BOD and senior management.
Mr. Bendall's exercise should propel the pps forward, as it makes actual drilling likely, as the company has said this amount of money will enable drilling.
Not sure your definition of 'dire.'
$58K in cash buys less than a million shares, out of the 135M total available in the RO. And represents less than 1% of the targeted raise.
Conversion of debt to equity is a bit ingenuous; company has no assets with which to repay the debt unless it strikes oil, in which case the equity is far more valuable. Net, all this conversion does is to dilute shareholders while delivering no new cash -- the objective of the RO.
So, 'dire' to me overstates the success of the first round. Unmitigated disaster would be a better summary, IMO.
Hopefully, EEGC will soon announce that Mr. Bendall has fully subscribed the remainder, as he committed to do in writing as recently as the RO registration statement.
Otherwise, the whole RO will be a disaster; as someone pointed out, the cost of execution was likely far higher than $58K.
The dollars that count don't send in their RO ballots via ten day snail mail.
EEGC knows how they have done on the RO, +/- 10% (or less).
The company has elected not to disclose the information, but Howard -- who I think we agree has the most information of anyone on this board -- advises that Mr. Bendall is in Houston (home of US oil) looking for financing.
Which would be strange if Mr. Bendall had fully subscribed, as committed -- and had the rest of the 50M LOC at his disposal, as I am guessing he would be offering far better terms than the Houston Vultures.
Net: doesn't take a rocket scientist to guess how the RO came out.
To those who say, MRT would not give a lease without assurances of RO success, recall that (per Malcolm Bendall) MRT reneged on their agreement of a full lease (giving only two areas) AND leased for only two years.
Arguably, MRT's actions are because of the financing situation -- but in a negative, not positive, way.
Certainly, that is what the market as a whole believes.
The 'rumor' of an unsuccessful RO comes in part from Howard's report that Mr. Bendall is busy organizing financing.
For myself, I observe that Mr. Bendall announced his LOC in a PR in June 2009, and it appeared to still be in place -- and planned for use on the RO -- when the RO was finalized just a few short months ago, per the quoted registration document.
Surely, any change from LOC availability and intended use would have been a material event requiring disclosure (much as initial LOC availability and RO exercise intent was disclosed) -- unless, of course, EEGC was not advised until it was time to execute. Which would certainly cause an unexpected credibility problem all the way around, including Mr. Bendall with the Board of Directors of the company.
So, I'm simply waiting to have the company announce RO success, together with exactly how much of it was subscribed by Mr. Bendall.
And, then, of course, date of first drilling.
If Malcolm is busy raising 'additional financing,' does that imply that the RO was not successful -- or that the $9M (oops, $8M -- some investor converted debt instead of contributing cash) from the RO is not sufficient to drill?
Neither is particularly welcome news.
Hopefully he will be successful, but I'm sure potential investors will want to know why Malcolm is not investing funds from his own $50M LOC, as the costs of a couple of exploratory wells would be but a fraction of those resources.
Accurate summary, but incomplete.
The key missing element, as has been the case for the last two years, is cash to drill. The original Chinese deal, as I recall, was that they would have an option to buy half the company for $40M. But at that time, pps was much higher.
I don't know what additional consideration they subsequently demanded, but I can't believe it was worse than what will be demanded now by any third party. After all, we are talking the financing of a set of wildcat wells -- seismic is interesting, but as rigman pointed out, it is still a wildcat.
The only press release which will move the stock up, IMO, is one which says EEGC has money in the bank to spend on drilling, at an acceptable level of dilution to current shareholders.
Or, perhaps, a PR which says Malcolm has in fact given EEGC the rights to deploy the infamous flare gas technology and that BP has elected to deploy same at a large margin for EEGC (which, of course, would result in money in the bank to allow drilling).
Key: need cash. And I'll bet my dollars to anyone's doughnuts that the RO did not achieve it.
Where is Clipso, time to start the clock again....
The RO has happened, true.
But I think the "antis" have contended that at a market pps of sub .04, it would not be successful in raising the desired funding level.
I have previously stated my opinion that it would ONLY be successful if Mr. Bendall fulfilled his often (but not recently)stated commitment to take up all otherwise unsubscribed shares, an opportunity open to him (and all other eligible investors) in the recently closed second round.
Hopefully, we will soon find out the results; as a long, I hope they are positive and we have $9M to spend. Well, $8M to spend, because someone converted $1.2M of debt to equity in the first round, delivering no new cash to the company.
Agree that Malcolm Bendall has the most to lose, but that is not to say he won't.
EEGC has a two year lease, but do they have the funds to execute -- and can they get those funds without totally diluting existing shareholders? The market's consensus would appear to be that the RO was unsuccessful in raising the desired $10M; my calculations from the RO PR update suggest that less than 20% of the shares were subscribed in the first round, with more than half being a debt to equity calculation which delivered no cash to the company. Net, $1M +/- came into the company in that round.
There is no doubt in my mind that pps will soar if $10M is available at a 'reasonable' price, but the market consensus is that this is highly unlikely.
It is certainly interesting that Mr. Bendall is in Houston, discussing technologies to which EEGC has access.
What is interesting about this, is that last summer Mr. Bendall said he would be transferring North America rights to this technology (assuming we are talking flare gas technology, as others have suggested), to EEGC. Apparently, hasn't happened, since EEGC only has access, not commercial rights. And there has been no PR.
Since it hasn't happened, I would prefer that Mr. Bendall focus his energies on making drilling happen in Tasmania, that is what is interesting for EEGC.
In that regard, we are all pleased that we have a 'conditional' contract to buy a rig, and a lease with 'conditions.'
Better than no lease or rig at all.
But for me, the current stock price reflects the Market's belief that those conditions will be difficult to meet. Or, has there been a PR which has spelled out those conditions and EEGC's ability to meet them? Maybe it will happen this week, with the closing of the RO if Mr. Bendall has executed on his year-ago committment to buy otherwise unsubscribed shares.
One of the more interesting aspects of this press release is that it places no dependency upon RO success for drilling commencement.
So either the RO is known to be successful, or other sources of funds have been found.
Heraclitus, fair point on EEGC desire to no be dependent on Hunt or another drilling company.
Having said that, if the rig was ordered a year ago as I think I have read, then likely it was ordered in anticipation of Hunt doing the first couple of wells, and EEGC following on, a model which I think we would prefer from a financial perspective.
If ordered more recently, it is also possible that EEGC was unable to find a drilling company with whom they could make a satisfactory arrangement, or perhaps reports of EEGC's Hunt experience discouraged other drilling companies.
WShaw14, I'm confused about your response to rigman.
You are saying EEGC does not need a rig which can drill 3000m (10000 feet). Yet you seem to be supportive of the company's decision to buy a rig which can drill 15000!
For myself, I am confident that EEGC can figure out the depth to which they need to drill. My surprise is that a cash-poor company would make a decision to BUY and OPERATE a rig to drill its first wells.
I can understand purchasing and operating a rig once the first well is successful -- reduces costs.
In case the wells are unsuccessful, EEGC needs to have some cash available to commercialize the flare gas technology, assuming Mr. Bendall actually fulfills his promise to transfer rights to the company.
Meanwhile, look forward to a statement from the company as to how long it will take to begin drilling -- should resolve rigman's issue about certification, travel, etc.
I agree, it is a great thing if the CEO wants to buy up the RO so he can increase his percentage ownership.
And if keeping that quiet is why he did not say he was going to do so, I am fine with that as well.
But then why did he previously say (more than once!!) he was going to buy (up to) the entire offering? Maybe consistent thinking is asking too much....
In any event, like (almost) everyone else, as a long I am eagerly looking forward to the successful completion of the RO (no matter who buys the shares), award of the lease, commencement and success of drilling.
But judging by the current stock price -- which is the efficient market accumulation of the probability of all of the above happening (combined with an expectation of oil price and rate of pumping) -- the overall market is not confident in a positive outcome. Contrarian opportunity, one would argue.
Not sure why this note is directed to my message.
I have not even found the other significant message board since EEGC earned the extra 'E' related to the timeliness of financial filings.
I merely reported how I read the instructions which were in my online account -- when signing up for the first round, state number of shares willing to take in the second round. I am hopeful that someone will confirm or modify based on the instructions which were in their account, although it seems strange that they would differ which would seem to be the case per GMan55.
I would add an extra observation from Howard's message 14549 -- if Mr. Bendall did exercise all of his eligible shares, as did the rest of the Directors per the press release, then the percentage of other eligible shares exercised is VERY low, not a good sign for the second round outside of Mr. Bendall signing up as earlier (but not recently) promised, for all that remain.
So, we should all hope that Mr. Bendall (and the other Directors, as able) will follow through so that the RO is a success.
Anyone have a forecast on when the recommended lease approval will occur? We are now two weeks past the expected date per the company, and one week past the new government in place. What could be holding us up?
It was my understanding from my offering materials (through Charles Schwab) that only those who took up all of their eligibility in the first round, would be eligible to participate in the second round.
And, at the time of INITIAL exercise, rights holders were asked that if they had fully subscribed, how many shares they were willing to subscribe in the second round, which could be more than they initially subscribed (note: this process can be quite muddy for those with shares in multiple accounts, which would make it difficult for the company).
Does someone believe otherwise? In reading other posts, people seem to think that shareholders (perhaps only initial subscribers)will get another communication about their interest in round two, in which case this post is irrelevant (and hopefully, someone on this board will advise when they get that communication).
But, if my reading was correct, then no amount of publicity at this point will impact the overall success of the offering, it would be a mere matter of arithmetic.
And following, in exercising their allotments, Malcolm and the other Directors said they would be willing to take 100M shares (or whatever the right number is) in the second round...
'Fairness' -- and timeliness! -- is served by a pro-rata distribution of shares to those willing to take them in round two, not by some 'third' (and currently undocumented) round after round two is over, at which point there might in fact be more information available. That would be the height of unfairness, so I doubt it would be allowed to happen.
Point about risk is well taken. And agree, asking Howard was inappropriate -- should have just been a general observation.
Having said that, management credibility is always important. Shareholders need to expect that of their CEO. As Mr. Bendall has previously said on more than one occasion that he would personally take on all unsubscribed shares, it is not unreasonable to be concerned that the commitment was not repeated at this critical juncture.
Today's PR specifically notes the requirement for adequate financing to commence drilling -- it is worth talking about its source and price.
So, what we know is that less than 20% of available shares were subscribed in the first round, and that in today's press release, Mr. Bendall is quoted but does not reiterate his commitment to take on all unsubscribed shares.
We are told that the directors bought all their shares -- but we are not told how many that is.
If Mr. Bendall is not committing to take up all unsubscribed shares, and only 20% were subscribed in the first round, from where do we think the dollars will come to buy $.04/share stock for $.07/share?
Are we missing something?
Howard, you always have insights, look forward to the explanation.
I am not sure why the 'second phase' of the RO takes 30 days, or why it takes so long to 'tally the results.'
As part of my subscription documents to the first phase, my broker asked how many shares I wanted as part of the second phase. This information had to be turned in before first phase ended, a couple of weeks ago.
So, the company should know results.
Howard, you have mentioned MB's patent on the flare gas technology several times in the last week. Do you happen to be aware of the patent number so we can research its significance versus competitors? Or do you just accept there is a patent and it has value based on MB's assertion?
Also, are you aware of any documentation that EEGC actually has rights of any sort to this technology? To the best of my knowledge, MB said he was transferring certain rights to EEGC last summer, but actual filing has not been announced in EEGC PRs or SEC filings.
And, where is there documentation that EEGC has any interest in whatever flare gas technology exists?
There was a PR last summer that MB was GOING TO transfer certain geographic licensing rights for the technology to EEGC.
If in fact such rights are worth billions, as suggested by some on this Board, then such a transfer would require disclosure in a PR and/or SEC filing as a material event.
The fact that there has been no such disclosure would suggest that (a) the rights have not been transferred; and/or (b) they are not deemed valuable by EEGC.
I am suspecting at least the former, since the transfer of (valuable) rights would be viewed as a positive for EEGC, thus helping pps go over .07, thus enhancing success prospects for the RO.
Interesting question of mechanics re: when Malcolm is able to buy his committed shares.
I do not know the mechanism by which he would buy the shares at .07 AFTER the RO is over -- anybody know?
My GUESS is that during the overallotment period, you put in for as many as you are willing to buy, and the shares are then allocated pro-rata. So, Malcolm need only put in for ALL of the unsubscribed shares at that point in time -- since that is what he has said he is willing to do -- and we will be done.
If I am right on these mechanics, no value for other shareholders to subscribe at all, as there will be no time value in subscription, since it is a given that we will go to overallotment period and all shares can be bought by Malcolm at that time.
If on the other hand there is some additional process that has to be followed after the overallotment period, and Mr. Bendall perceives the same importance of time in this equation that you do, then he should be laying all of the parallel groundwork so that he can buy the unsubscribed shares the day after the overallotment period ends -- so again no time value.
Perhaps someone knows the precise mechanics involved, so we can all understand what paying 2x the current value buys us in terms of time to begin drilling?
And in any event, if we know we are buying a rig off the production line, then the order must already have been placed, and perhaps that is the gating factor anyway.
Since Malcolm has promised to buy ALL rights offering shares otherwise unsubscribed -- and we know there will be some unsubscribed, so we have to take the time for that process -- seems to me that the maximum return on anyone else's $X investment is obtained by buying shares at .035/share, not .07/share.
Short on capital, own a rig?
I am glad EEGC has a 'master driller,' but what kind of money will it take to buy a rig and then attract a first-rate crew away from the Hunts of the world, and keep them?
Once oil is discovered in sufficient quantity to assure that many wells can be drilled over time, perhaps it would make sense -- but not at this point.
Frankly, I am guessing this is one reason that the stock has not rallied on what seems to be relatively good news about the lease; there is still no way to drill -- cash or rig/crew, and winter is approaching.
Howard --
Any idea when Malcolm will publicly announce that he has sent in his check for his shares of the rights offering, and reconfirm his intent to pick up any unsubscribed shares?
And, would be great to hear the same from the large shareholders on this board who have suggested it is better to buy shares from the company at .07 then shares on the open market at .03x.
Anybody have any idea what a new rig costs, and when it would be in Taz? Let's hope it gets winterized in advance....
Chief junki --
The stock price is the present value of expected future dividends discounted by likelihood of those dividends.
The fact that the stock moved very little today, on the basis of the EEGC press release, is reflective of the fact that the market as a whole does not ascribe significant value to EEGC press releases, perhaps based on experience.
The fact that your calculation suggests a stock price north of $1, and the stock is under .04, is a function of the market's low estimate of the likelihood of success combined with a view as to when dividends will actually start flowing.
As a factual matter, the press release stated that:
- Only two of the prospective sites (albeit large ones) out of the total 12 will be licensed, IF the minister's recommendation is accepted;
- That best case the license will appear after the current rights offering expires, casting some level of doubt on the success of that offering, although fortunately Malcolm Bendall has said he will buy all unsubscribed shares, so that shouldn't be an issue.
It said nothing about the status of the Hunt Rig and when drilling might actually begin. It also spoke about 'terms and conditions' without spelling those out.
Net: the market wasn't impressed by the press release, as the PR tracked market rumours (see prior discussions from Z and HH).
The stock will move as the following happens:
- MRT grants the lease.
- EEGC has money to drill.
- Drilling actually begins.
- Oil is found in commercial quantities.
And, of course, with speculation about any of the above.
Missouri, don't see why you say it doesn't make sense for Malcolm to invest before MRT rules -- he may well want to invest so that EEGC can exploit the commercial value of the very valuable flare gas technology provided to EEGC per the Company's August 20, 2009 press release (EarnestDD, to your point, tongue a bit in cheek on this one).
But -- taking him at his word, in order to create a reason for the rest of us to invest, he should announce his investment is complete and irrevocable. At the very least, some investors may well think he 'knows something' and will follow -- though I suspect not the smartest of them (see next paragraph)
Howard, to your point of investing to 'help the company drill.' Most investors invest in order to make money, and if shares can be bought at .04 rather than .07, they are likely to do that with their available dollars in order to maximize shares.
On the other hand, once you have made your irrevocable investment of your full allotment at .07, do share that fact as, like Malcolm's investment, above, it may in fact spur more third party investment.
But, why should ANYONE invest at .07, when the stock is at .04, since Malcolm has said he will buy all unsubscribed shares. EEGC does not need third party investor charity, since Malcolm has already committed his own.
Note that the end of this offering period comes within a half month of clipso's initial prediction of when we would know about the RO and MRT, not bad, we will at least know RO, and my guess is the RO was timed because company expects a (positive) MRT announcement during the offering period.
I see:
Flair gas rights were given to the company by Malcolm for North and South America.
I have seen no filing or announcement of this actually occurring.
So either
(a) I missed something -- quite possible;
(b) It never happened; or
(c) It happened but was deemed immaterial by EEGC, thereby not deserving of an announcement or filing (which would mean EEGC does not think it is worth $5M, let alone $5B).
And on that point. $5B of resultant shareholder value. Total market cap of EEGC is $11M, so the market clearly does not share your enthusiasm, either because it hasn't happened, or because it is not expected to happen or because even if it does happen, not valued that highly.
Worth a follow-on question as to when said assessment will be completed and announced?
Is there a statutory timeline for response, and where are we on that timeline?
Sold below the bid -- but that can happen if the size of the block being sold is larger than the block being bid.
Someone was in a hurry to get out, hopefully not a negative omen.
And as I recall, the 50% JV with Smart Win would have valued Empire at $0.25/share, or 8 times the current value, and brought $40M for drilling.
Comments on EEGC's funding:
- Evidence of 'no funding' is the company financial statements. I don't think there is cash on there, or account receivables/marketable securities, or (in the notes to financial statements) description of funding available but not yet drawn down.
- Funding availability would be a material event and therefore disclosable. EEGC has not announced funding in hand.
Net: we have to assume no funding.
This discussion of 'exploration' versus 'G&A' expenditure is a bit of a technical, semantics discussion.
From an SEC point of view, for sure G&A is much higher, and there has not been $50M spent on actual exploration. We know that from reported financials.
Perhaps someone can illuminate us as to how MRT requires G&A/exploration expenditures to be reported as part of the 'leasehold commitment' expenditures, could well be they allow (at least some) G&A within the total definition of expenditure being required, since without G&A you don't have a company.
We separately all have our own opinions as to whether the 272 meters of wells drilled should have required $50M; or whether $50m should have enabled a lot more drilling.
Point of this post is to suggest we have a semantics discussion which needs clarification.
No 1 swede:
I suspect no-one disagrees with your statement:
"i will give mine: with lease approval, ro done, funding in, drilling started, the pps goes way higher than 4.7 cents."
I would even say it would be double digits, with sufficient funding to drill multiple wells and a sufficiently robust (coverage, length) lease.
Today's market price is simply expressing an opinion as to the likelihood of this happening.
To Z and earnestDD:
My tongue was firmly in my cheek when I referred to the possibility of a flare gas technology announcement, boosting the stock.
I hate being negative, since I am a long (with a big loss), but IMO the issuance of various press releases, flare gas technology, 'independent valuations,' etc., is an attempt by the Company/MB to get the pps up so that (a) the RO can be successful without MB oversubscribing; and/or (b) a financing 'deal' can be struck with a third party, starting from a higher valuation.
Note that the SmartWin deal would have given SmartWin half the company -- but at a .25/share (if I remember right) valuation.
Regarding the RO factored into the pps.
What IS factored in, per efficient market theory, is the market's view of the likelihood of SEC approval combined with the likelihood of a successful offering combined with the likelihood of having anything other than debts upon which to spend the money, etc.
Overall fact is that the company is valued at approximately 75% less than when the RO was first put into a press release.
The reason the stock might move somewhat on approval of the RO, would be a belief that the company wouldn't let the RO go 'active' (meaning only 30 days to complete) unless it thought lease approval was close behind, since IMO, absent lease approval the stock is unlikely to move past .07, but with lease approval (for a sufficient amount of time and coverage) it might well.
Or, perhaps they would go 'active' if they were about to announce a large contract for the flare gas technology which could also push the stock over .07; anyone heard more about the flare gas technology, whether the technology has actually moved into EEGC as Mr. Bendall committed?