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You said a while ago that this thing would not end before the
later part of the year. I agreed then and I still think so.
This book still have a large portion of it to be written.
The committee was not allowed to employ Blackstone for $150K/month
+ $1.75M at the end. that was another nudge to the creditors to
make a deal with the management. currently the debt holders have
the option to wait it out until exclusivity period is over. that
happens on 8/6. its either that or strike a deal.
The easiest path forward would have been to convert the bonds and
control a company with no debt. then you can get a jv partner for
the electric plant and farm out the onshore blocks.
If this deal were to be consummated, you wins?
Bonds are now at around 10c, shares market price reflect less than
$1M equity value. if there is no one of the stakeholders on the
winning side, why would the deal take place?
Lets see what happens, but so far it does not make sense that
the creditors would allow this deal to happen (exclusivity for
management only expires on 8/6).
Judging about value - remember the creditors wanted to pay $2M to
blackstone for their deal making ability. you do not do that with
an estate worth $10M. especially not when it comes at your
expense.
Good luck to all.
Just remember the old saying about the more laws and the less
Justice. You were not about to join a group worth of a lot of
respect (for the most part).
Regarding this company, you need to remember that this company
does not have any secured debt. that makes a huge difference
and the funds who bought the distressed bonds (at values much
higher than today) did not do that just to have management
sell it for $10.5M + turbines - professional fees...
The creditor's committee tried to use Blackrock for selling the
assets. the fee was to be $150,000/month + $1.75M at the end.
Lets see what the judge and the court say.
My estimate is that 51% of Z-1 alone is worth as much as the debt.
I find it hard to believe the panic is justified.
Good luck to you and hope your projection here is wrong.
FYI - Dune is a completely different story (which is why no funds
got attracted to it).
Do you have contact info for the committee?
Is the current plan not saying that (except for turbines)
the rest would be sold for $1M?
This is a joke of a plan.
Only my opinion and if it went through, the lawyers are going to be
busy for awhile.
Only my opinion.
I bought a bit more. the creditors are surely not going to just
lay down and take it.
The 0.011 order I have put has yielded so far only 20,000.
Anyway, I hope I am right. usually things happen logically.
I would not be surprised if Indaba and the other hedge funds are
now bottom fishing.
Good luck to us.
The plan currently suggested by management have the spin off
word in it, but that spin off has nothing to do with the
shareholders or the bondholders. it is selling some assets for
$1M. just the one onshore block had over $25M invested in it
over the last 2 years (testing, geo etc.).
This is not very serious...
At this point in time, the interests of the bond holders are the
ones most in focus. the creditor's committee is supposed to be
one to stop transactions like that.
I hope all will do their job and a resolution which maximizes
everyone's returns will happen. this is a pocker game and your
property is a part of it...
Are we looking at a pocker game?
The management basically told the bond trustee that since the
trustee is forcing liquidation of the company, the best they can
do at such a short period of time is those pathetic numbers.
The management has a grace period to have exclusive right to
solicit offers to resolve the situation (the bankruptcy) in order
for the company to continue as an ongoing entity. instead of
doing that, the management has chosen to try and scare the
creditor's committee by accepting these low ball offers. the
management probably want to force the creditor's committee to
agree and swap the unpaid bonds into new equity (diluting the
existing shareholders by quite a bit).
The issue is that a creditor's committee and the management both
have fiduciary duties. the committee is composed of the larger
bond holders and it is obligated by law to maximize the proceeds
for bond holders. if this plan gets executed, the committee
members might be sued (and so does the management) for the
gross mishandling of the situation.
The committee wanted to use Blackrock to look for buyers for the
assets, but the management bought time by saying that the cash
calls have to be resolved right now.
Bottom line - I believe we are looking at a pocker game, in which
the proposed buyers will get paid for their involvement, but
the resolution is still a bit away.
Good luck to all. Hoping I am right.
E&P is a subsidiary of bpz resources. it is the company who owns
most of the assets.
my understanding was that there would be two stages -
1. zedd energy buys everything (all assets, not the legal entity) and
pays $10M which will be used to cover the cash call of Z-1.
1a.Zorritos is a different entity which will pay $1M for the interest
in Ecuador (some suggest this is the payoff for the management).
2. a new corporate is created (to be owned , I only assume) for the
purpose of holding the rest of the assets of bpz (excluding z-1
and Ecuador interest).
I have been trying to contact the company to verify that the unsecured
debt will be assumed by zedd (the purchaser). it seems logical, but
this is legalities.
If the new companies is without the liabilities, then it is a deal of
the century t current prices. I am still looking for the catch...
if it looks too good to be true...
Good luck to us.
not only turbines left -
the permits and lease on a location for the power plant left as well.
the idea is to sell to a developer company.
If that is the case, good.
That is a good reason to be excited.
What about the bonds outstanding?
The $230M + of bonds were the problem to begin with. Z-1 was the
only cash producing asset (outside of the fact that the capex for
new platforms put BPZ over the hedge...).
can I assume that the bonds were
assumed by the buyer or did the company just gave Z-1 for
nothing?
If BPZ got rid of the debt, I personally believe there is a ton
of value in the power plant (assuming the people in charge are
competent enough to execute it). Z-1 needs the power plant to
happen 4 years ago, not yesterday. all the natural gas that is
reinjected can generate (@ $4/unit) well over $30M in cash flow
(in theory - as opposed to reality...). all you need is to find
the financing of the last $127M...
Again, if the debt is gone, that is a good deal for BPZ.
They owed nothing on the turbines. the only debts were the
$234M unsecured bonds and the 50% of the $19M last cash call.
Distressed situations can not be judged on charts. charts require
a volume and liquidity who does not exist here.
What you have in these situations is a number of parties who try
to manipulate the price and most of them have intimate knowledge
of the assets and are heavily invested (most times not in the
stock, but at the debt level) in a small number of opportunities.
When I say manipulate, I mean either pump or bash. all noise (
not based on solid facts) is manipulation in my book.
Tried to understand the agreement last night -
All I ended up getting is an headache. can someone please
summarize the sale terms as of right now?
I am long (more on the bonds and less on the shares), so it would
/could be nice if the ultra bulls are right.
Thanks in advance.
p.s: I consider myself pretty advanced in my understanding, but
the 130 pages of legalities have won against me (this time)...
Any new information?
We knew that there will be a bid and that there would be a winning
bid. does anyone knows what are any real numbers or are
everyone here are just trying to manipulate the stock price
up or down?
What assets were exactly sold is another question and we all
should remember that PRE has a right to improve or match any
bid for Z-1 and buy it by itself.
The bigger issue with BPZ is the bonds, not the shares. there are
over $230M of bonds outstanding and they have to be paid before
anything is given to shareholders.
The last question is why would the unsecured debt holders hire
Blackstone if the management still has exclusivity for another
month. the only reason I can think off is to show management that
there are alternatives to their efforts and that they can not
dictate terms to the unsecured debt holders.
Good luck to all. the numbers of any winning bids will be very
Interesting to see.
They are welcome to have it, just have them pay a decent value.
that is all. they can foreclose all they want, as long as they
pay a pretty penny...
Additional assets -
There are no additional assets. what you saw was a gross amount before
elimination of inter company loans.
Book wise, the company right now is at $0 book value, but to look at
book value would be to say that the bonds (trading at about 20c/$) are
to be fully valued. the assets also were written down to reflect close
to $0 value to gas to power and about $20M for the turbines.
According to that book, Z-1 is worth around $170M.
I also suspect that the reason for the $0 revenue in the company's
monthly reports might be due to the fact that the joint venture with
PRE is using the funds to pay for the part of investment that BPZ is
supposed to be paying for.
Bottom line: lets hope the creditors committee and blackstone are trying
to extract value for all stakeholders. the value is there, but it will
be less certain before it gains certainty.
good luck to all.
You do not have the facts yet.
Nobody know what is the true value of the company at this time.
There are indications that the two hedge funds who are dominant
at the creditor's committee think it is worth while to spend
millions to get Blackstone in for the purpose of evaluation of
values and opportunities. that is a good sign.
Both shorts and longs should be anxious. uncertainty is the worst.
good luck to us all.
I have not seen where management is disclosing any stalking horse
bidder. as far as blackstone, they are consultants. do not read
too much into the name. they are a separate division in the group
and need to generate their own fees (like in this case).
Turbine sale?
All I seen in the last few days was that the creditor committee
is pushing for Blackstone to be involved in order to maximize
value. The sum of fee for the Blacstone name is ~$2M ($150K/month
plus $1.75M at the end plus expenses...) or more.
I hope they are worth that money. the two funds heading the
creditors are Indaba (and I can not remember the other name...),
so I hope they know what they are doing and they specialize in
distress situations like this one - when the value exist, but
work is needed to extract it.
No even a stalking horse bid yet -
management is still negotiating with multiple parties to have a
stalking horse bid (minimum), so I would be very surprised if the
unsecured debt holders would resist the delay.
It is ironic that a couple of days after management was trying to
scare the debt holders, it is trying to go back and regroup.
Lets hope all sides become more serious and united in the common
goal of maximizing value.
lets hope that it is done after september in one way or another.
You are correct, but usually the court would grant it.
Management wants more exclusive time - meaning before anyone else
is allowed to jump in with their own offers.
plan is a generic phrase for anything you do in bk. liquidation
requires a plan as well. sit tight and lets see what offers
come in. The more time goes by, the better off the company will
be - professional fees are small compared to cash flow @ $65/bbl
and they are not spending money on anything but Z-1 (only as
required). no $22M/year on onshore stranded gas (until further
notice). the company has spread itself too thin and now (not by
choice) they are going back to their actual business.
BPZ mentioned liquidating assets. given more time to arrange offers
will have a potential to increase the proceeds from Z-1.
PRE paid $335M for 49%, thats correct. however, to do the math of
how much it would/should be worth today, you need to reduce from
that amount the cash flow PRE got from Z-1. that would probably
be around $80M over the last two years. after you do that, add
$25M for the payments (beyond the carry) for the two new platforms
(49% of that as well).
Other notes:
oil price back then was $100/bbl. today it is about
$65+. that makes for a huge difference.
The corvina wells were not flowing as well as expected.
these things will reduce the price and probably why PRE is
trying to make BPZ sell now.
When PRE bought in, they threw a number of 34MMBBL, mostly oil.
Now we know that about 50% of that is actually gas and it is up
to BPZ to make a way to monetize it.
I am not saying that BPZ does not have a large value beyond its
bond liability, I am just saying what the risks are.
My position:
I own some bonds and some shares (more bonds than shares).
hurting shareholders vs wiping them out is not the same. dilution would
be at higher value than $0.02/share (if it happens).
The Z-1 should be not very far from the liabilities (bonds).
If PRE is successful at foreclosing, it might take some time for
any kind of arbitration to take place, in order for the bond
holders to get most of their recovery. that is one of the cards
management is probably holding against them.
Easy solution would be to find a buyer, but that will take time.
time means that bond holders would allow for BPZ to pay PRE for
the next cash call.
I believe that is the chess game that is going on right now.
Once the two new platforms are in place, there would be a need for
quite a bit of capex to drill wells to connect to them and start
production.
Lets hope for a decent resolution, where all stakeholders make
money.
Look at it at a different way:
Cost of production is $32/bbl, royalty 5%-20% of revenue.
assume production of 6,000 bbl/d and royalty of 5%.
assume long term price of $70/bbl.
Go after proved only (to be conservative):
16M / 2.1M (yearly production @ 6000/d). assume 20% annual
decline.
your margin is $30/bbl (based on super low numbers of
today) and if you assume production will run as planned
and you discard any future exploited liquid (outside of
today's proved) you will get a discounted value of probably
around $250M for the block. 51% of that is $127M.
If you look at value of gas as an upside, your value goes up
to as much as twice (assuming $4.5/mcf, a much lower decline
rate - 7%/year, starting production of 40,000 mcf/d, NP10,
most production expenses allocated to oil already).
PRE bought into Z-1 based on $185M existing value and $150M carry.
that reflected a value of $335M for 100% of the block. since
then the carry was used, another $20M+ were invested by BPZ for
their part (beyond the carry) for the two new platforms that
are almost entirely paid for (are in Houma, LA).
I hate to make predictions about sale prices, but the value is
there. I can see why PRE is trying to take over now, but the
price will be steep for them (especially as full of debt as they
are).
This is without looking at any other assets of BPZ.
Liabilities are ~$244M.
Good luck to the company and to us.
ge is in the equipment business, not production. oil is fine and the
sky is not falling. in a year or two it will settle down above 80, but
bellow 100. this area is tied to brent, not wti. huge difference.
the debt over here is all unsecured, so the bondholders would not allow
debtor in possession. that was the main issue.
there is a ton of money that is waiting for the right assets. not enough
supply. the problem here is the management. never refinancing when oil
was high and then messing up in bankruptcy.
If I did not know any better, I would have said this is what management
wanted all along...
There is a ton of demand for infrastructure projects. I do not know what
has prevented the project to date. projects which started after 2010
are already producing energy and the demand is growing.
Whoever will own Z1 will have the same issue of having to monetize the
gas. without the gas cashflow, the block will produce less than 50% of
its potential. it looks more gassy than oily.
Now they are talking about selling the turbines. I think maybe the
bondholders had enough of the management and all of their
professionals...
Like I said before, I own more in bonds than in stock.
About the cash call boogyman - you can not take someone's interest in
producing wells because they will not pay for more wells and especially
when they own the platforms and the barge (my understanding is that
BPZ paid for these themselves).
A lot of weird things are happening. my guess is the ceo is about to take
a lot of value from the shareholders.
o`hara group is waiting for the climate to improve for oil and gas.
time will tell if the gamble works.
as far as bond holders are concerned, they would go with the offer with
the most financial backing.
here is something about IC power
http://www.jpost.com/Enviro-Tech/IC-Power-Peru-sign-1b-power-agreement-333652
You have to see who says this and why...
O'hara group is looking after the shareholders. the bond holders
want the certainty of being owned by Alfa (a stronger company).
Management wants a sweetheart deal for themselves and they
believe Alfa would make them rich (if they just sacrified the
shareholders a bit...).
Everyone has a job to do. the debt is $100,000 per flowing barrel
(which is high).
Good luck to all the sides. BPZ is small potatoes compared to the
$4B debt they have and commitments they have over the next year
or two (the 35% interest in Karoon's Brazil discovery etc.).
They are in a tough spot and O'hara is trying to gain by increasing
the stock price.
The 2015 debt is $60M + accumulated interest.
The turbines cost was less than $60M and that was a couple of
years ago, so the value today would be less. on top of that,
BPZ needs the gas to power project to happen. that is what will
make the company sustainable for the long term.
The company needs to find an interested international power
company who wants to finish the project and own most of it.
Once you do that, there will not be pressure any more.
The whole pressure is because oil revenues are not enough to
prosper on. you need the gas revenues as the kicker.
Maybe they should try the Israeli company IC Power already has a
project they are doing in Peru for an ng plant of 500MW. maybe
they would want to have a look.
Once you factor in the project, the value goes up dramatically.
for bpz this is not bad news. the more time is given, the more stability
is returning (which will increase valuation of assets).
the alfa offer was based on $50 oil and going down. we are at 60+ with
ability to hedge at 65 for years.
the key here remains the gas to power. $30M/year in gas revenues could
make this very cashflow rich (for both companies).
lets hope for the best.
The court allowed the company to pay its payables (there was more
cash than operational payables). those got paid at face value, so
that the company could continue operating.
I am talking about the unsecured bonds. basically the first $228M
will be their recovery (if more, some value for shareholders).
The judge does not know yet about offers and their proposed value.
I hope you are right. I have some shares (@0.036) and some bonds
(at an average of 22 cents on the dollar).
If you are right, I will do very well. if you are wrong and the
sale will be at less than $220M enterprise value, hopefully the
bonds will recover my loss on the shares.
Good luck.