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Always look at the enterprise value, not the market value.
I would be very surprised if wells fargo would not insist of full
payment or assumption of full debt while injecting equity.
That is the biggest barrier for shareholder's value.
Default on what? didn't PRE just finished their investment in
drilling (for which they got to own 49% of the production)?
I believe that the capex is going to be quite low in the immidiate
future (mostly testing of other zones on existing wells).
I understand you are short, but please keep yourself from making
statements without any substantiation.
If you are right, please show the release of the information and
explain what would the process be until foreclosure (on what
exactly? the equipment is owned by BPZ).
1. I think the platforms of the two fields actually belong to BPZ
and not to the joint venture. I could be wrong, but their cost was
close to $80M (just a few years ago).
2. PRE needs the gas to power just as much as BPZ, so having
control over the joint venture does not help them in generating
gas sales. only gas to power would. Ecuador sales are a pipe
dream. gas to power would make (relatively quickly) a market for
25,000 MCF/day (for only 135MW) which would yield @ $4/MCF (low
number for captive production assumption) > $30M/year revenue
and would allow for later expension of electric production (the
JV is reinjecting 30,000 MCF/day and have a well or two which
tested as highly productive gas wells sealed - no market for NG).
The gas project itself could be an interesting opportunity to
attract capital (infrastructure fetches higher valuation than gas
and oil).
The gas electric generation could generate EBITDA of $25M/year
by itself (assume 90% availability, $4/MCF feedstock cost,
$65/MWH - low) and with less than $80M in additional required
investment, the equity generated should be close to $100M.
According to this, the daily production for april was only 3600 bbl/d.
I wonder what is the ipeline of recompletions or optimizing wells.
I think they used a lot of cash to pay off their accounts payable. it
makes sense. since their other liabilities are mostly future
plugging etc., their actual ongoing net debt (excluding bonds) is
negative (more cash than debt). that is a good start. that means dip is
not a must at this point and no new secured entities will show up (I
assume and hope...). lets hope for the best.
Where is the quote for? $60M of pari would imply $1.5/share. using
15c/dollar will be 22c per share. why would they go for that? it makes
no sense.
2015 and 2017 bonds have same seniority. they would go together whichever
way they would.
The Q will be taken out when the company is out of bankruptcy. it will
take some time to do that, even in a best case scenario.
Company needs to come out with a good plan to explain to the bondholders
why they want to be equity holders and why the value is enough in the
enterprise to preserve significant value for the shareholders. it should
not take a year, but a few more month.
gas to power is the key. it can add $30M/year in gas sales plus plant
margin with little capex to it. that will be the deal maker.
look for a partner to get 50% for financing the last $60-70M the project
needs (outside of a 10 mile pipeline from the platform).
You are twisting my words: if there is a way to extract value from the
gas, bondholders would be crazy to not take conversion into 80%. that
means dilution for shareholders, but owning a much better company.
Being part of gas to power gives >$20M/year with almost no capex and
part of non performing equity right now (close to $75M worth in my
estimate).
You are forgetting that in bk, shareholders do have a voice and this is
not a case of lack of assets, only of lack of liquidity.
If no gas value is given, the company should still be worth quite a bit.
I bought some bonds and some shares. time will tell.
What do you mean "will take a long time to reach that point"?
I think you might be right about the risk in the stock, but the bonds
are worth much more than their applied market value. the upside in them
is much more limited, as a result.
longer term, it all depends on gas to power. having another $20M of gas
sales per year, no interest payments, making some of the margin of power
production is a powerful combination.
Let time say its say and we will see the results.
every indication tells me that the unsecured bonds will be converted to
shares. the question is what value will be left to the shareholders.
I could see an 80% of the company becoming new shares and that would
leave the company with very little liabilities.
If you look at the fillings, the company would lose a lot of its value
for professional services (which I am sure wells fargo would love...
they are not holding the bonds, they are just a trustee).
The key over here is increasing the revenues via a viable gas to power
plan that could become a $20M increase in revenues (50% of $40M)
without much development cost (the gas is now reinjected).
With less than $100M left to invest to reach 134MW power plant, first
priority should be to do that and utilize the gas (and make margin on
electric production as a bonus).
A 50% holding in a power plant would allow for the company to be a
$74M revenues/year:
assume 2000 bbl/d @ $60/bbl (after royalties) @ 350 days/year = $42M
assume 12,500 mmcf/d @ $4.5/mmcf (after royalties) @ 350 days/year =
$19.6M (missing today).
If you add 50% of the power plant, you will have the following:
67MW * $65/MWH (assume) * 24 * 350 days/year * 0.90 (utilization) =
$30M - $19.6M (gas cost = intercompany elimination) = $13.3M.
This kind of revenue should be able to produce ebitda of $40M and to
maintain it the capex should be (for production alone - gas plant
excluded) no more than $15M/year (representing 50% holding in block
Z-1).
According to this, cashflow (assuming no debt) is $25M/year + option on
increasing production in the future.
according to globes whoever done the atp bk did not protect the israeli licenses well enough and that is why the creditors tried to seize them and sell them on the cheap to get the $54M they claim to be owed to.
I think the shimshon will go for much more (even and maybe because of the mira failure) then people think - especially that now leviatan is looking for a multinational strategic partner and that lng export looks like a very probable thing.
anyway, a good number on the rights will be a great move forward in the bankruptcy as it will take away a few excuses for stepping in front of unsecured bond holders.
You are missing the fact that atp will need liquidity to accomplish finishing their projects and start generating cash. dip is a very expensive form of financing. if shimshon evolves to the potential 2.4 tcf (20% chance of that... probably 50%+ chance of 1 tcf), the development will be worth much more. the only problem is that at that point the immidiate dip cash injection will make both common and unsecured worthless. cash right now can still save the recoveries for unsecured and equity.
later on it will belong to someone else anyway.
just a thought.
I think you are misreading it. israel has ownership right laws which are just as strong as in the u.s.
Israel sold those leases with certain obligations which include a commitment to develop economic reservoirs within a certain amount of time.
I am not sure about all the ownership issues of the different atp parts and how the israeli bk laws apply to them. that might be here more in play than anything else...
If I were a stakeholder in atp, I would want to monetize their israeli holdings for an immidiate profit, so I can replace some of the dip.
You could be talking here about a $250M+ liquidity boost that could render a lot of the dip unnecessary (and very expensive).
There are a lot of things in the way the decisions were made at atp that make me believe that either the managers are not very smart, or that their objective is not the good of the company.
There is no any other explanation for some of their actions.
If I were an activist shareholder I would ask the court to authorize the sale of the israeli licenses asap and maybe one or two other projects in order to generate liquidity for the rest of the projects and emerge from bk asap in order to preserve value for common, prefered and unsecured.
This could be a test for management to see whose interest do they care about.
do not forget the 84M that are in warrants + other warrants.
those warrants are at $0.12, so it limit somewhat your upside.
any financing beyond the initial $5M would cause further dillution
and the coupon for the $5M is 15% (could be pik for more dillution).
I am in at $0.08, but my eyes are wide open.
good luck to us.
The figures of 2010 are before emerging from bk.
The balance sheet after getting out of bk looks different.
The question is not if the equity was medaged. the question is how
much will be left to equity upon emerging out of bk.
You will have the hedge funds playing the game of reducing as much
as possible the por value in order to steal value from equity
and unsecured.
Only time will give answers as to the equity value left.
good luck.
Former claim holders are weak hands usually since they have a
different agenda than stock holders. the company which I work for
have become an $600,000 in lyondell and I can tell you that
since small companies have hard time getting finance at reasonable
prices, than when claim money comes in it gets liquidated and used.
even if it helps removing warries for 3 days it is worth it.
it ytakes time for the shares to move to investors' hands who will
create a stable shareholder base (hopefully).
I have been following this thread fo a while and have some stock
in the company. I have a number of questions regarding this bk
case. if someone could try and clarify them to me that would be
great.
1. I understand that the large shareholders are trying to exclude
as many small shareholders (such as myself) as possible. what are
their chances of getting it through. I mean, any reasonable judge
with an IQ superior to a common goat should be able to figure it
out.
2. accredited investors - if they keep that term at the end,
besides the fact that bk is not supposed to descrimenate between
holders of same class, how do I show I am such a person? do I
need to start exposing all my personal assets? do I make a
statement? how does it work exactly?
3. are the original shares wiped out or do they stay in existance,
but just severly dilluted?
4. recovery - who enjoys the assets or monies recovered - the
company, the shareholders at the time or is it distributed to
shareholders? I would think option number 3 does not make too
much sense.
In case the judge decides to act like the large holders want -
what is our recourse. how can we derail the plan.
Any responses will be usefull for my understanding and I would
be appreciated.
Thanks in advance, Ofir.
That was one of my point all along. tronox have had the blank
check to identify efficiencies and get them done throughout the
bk. judges usually trust management to run the business and
you should take any financial reports given before end of bk with
a grain (or two) of salt, as the management has the distinct
intrest in lowering the bar and showing why the remaining
liabilities need to be as low as can be.
They have just managed to reduce interest rate on most of their
liabilities by close to $18M a year (which will flow straight to
fcf and increase valuation).
As far as paraguay is concerned, I would not want to be the CEO of
anglo american or bhp that puts a few billion into the ground
and then some chavez comes along and taxes him to death or just
nationalize it (it is the people's property after all...).
Only my 2 cents.
I would love to see the economics of raw ore at low concentration
moving by train or barge (paraguay has no exit to a sea) into
a transfer place to be put on a ship going to, lets say, china,
in order to be proccesed.
The only thing they could do is to create an entire industrial
complex to finish the titanium raw material on site and then
export it. that will take a long time to accomplish and would
require that international companies trust the local politicians
to not take away their capital. time will tell, but that is a
very ambitious project (if the data is even right).
I could, to a degree, end up as raw material for brazilian
industries.
Good luck to them.
Yesterday, when I posted about the cost implied by $1.4BN and
by $1.5BN I did not make something clear:
for sake of simplicity I will assume that all warrents are at
$1.45BN ev and I calculated that this applies $63 per share.
If you buy the stock and you do not own it yet than you are
paying about $0.7 per share and your conversion will be
1125000/42000000 = 1/37 which would imply that you pay a premium
of $0.7 * 37 = $25.9 which gives you total cost of $88 per share
or $1.81B ev. kronos is right now $2.8B ev.
Those who say that this is the top of the cycle assuming that a
cycle is a one year event since this industry has not participated
in the last chemical up cycle (that is why millenium vanished and
why kronos just arrived at where they were a few years ago).
Those who point to the paraguay titanium ignore the fact that a
lower raw material would reduce cost, but the titanium ore coming
out of there will go mostly to metal parts for aircraft, autos
and the rest of the metal market.
Botton line: this is a very fair valuation for a clean slate
company starting fresh with low cost production.
Good luck to all.
You are missing my point: you are confusing market cap with ev.
ev of $1.4BN is $950M market cap give or take, which devided
by 15000000 is $64 per share and for $1.5BN ev the stock needs
to be $70. at $70M net income the pe is 14 for 1.4 and is 15.5
for 1.5.
you can do the math for market cap/fcf and for ev/fcf based on
fcf of $147M (first year) and reach your conclusions about how
long it will take to be breakeven on each one of the tranches.
hope that helps.
On the face of it we should jump quite a bit at the beginning of
trading, but the market is the market and countless people can
vote in different ways then you or me think.
Only time will tell if we are right or wrong.
good luck to all of us.
Try the following:
If we assume $1.25BN of ev in exit - $468M liabilities =
$782M equity.
if you assume $70M net income and $175M cashflow you arrive at
the following: company does $147M cash after $29M / year of
interest (6% of $468M) and at ev of $1.4BN you are talking at
arket cap of $932M with fcf of $147M in year 1 with growth for
at least 3 years (untill more plants could maybe start coming
online). if the dollar will continue to go down and the demand
will come from foreign manufacturing and export to them from the
U.S than fcf will be higher.
the valuation is compelling for both $1.4BN and $1.5BN.
some will try to argue that the valuation is rich, but it is
better and more conservative than most other chemical companies
who are publicly held and have all the env. liabilities and the
rest of the famous "off balance sheet" obligations which end up
coming as a surprise more ofter than not in them.
Above was the long case. this is the rational and it is up to you
to decide if you like the chances or not.
Good luck whichever way you choose.
you do not want to compare huntsman or dupont with tronox.
Huntsman is involved with more businesses than you care to know
about and have huge amounts of debt.
Kronos is almost similar to tronox and should be comapred to them.
also, we are talking about ev and not market cap. if you talk on
ev of 1.5BN and debt of 500M than the market cap will be 1BN and
not 1.5.
I do not understand why people keep confusing the two things.
When you tank exit from bk you talk ev because the new equity is
not there yet.
"Tronox prepared the Projections in June 2010 reflecting estimates and market conditions at that time,
including a projected exit from chapter 11 on October 1, 2010. Since May 2010, Tronox has outperformed the
Projections and it is currently evaluating whether the changes in market conditions and the prolonged chapter 11
cases will have a material effect on the projections."
That is a quote from the document in your link. the management
will always try to be conservative (especially when that will
determine how much liabilities they will have). they have no
incentive to create expectations (before bk exit).
I would only say that over the next 3 years tio2 will be in
balance or even in slight short supply and due to demand from
growing areas the outlook is decent (especially in dollar terms).
Hope I am right and if I am than we would be in the money within
a year to 18 month on the first set and probably close to it on
the second set.
good luck to all.
I think you confuse market cap with enterprise value. These
warrents are based on enterprise value of $1.4B and $1.5B.
If the debt will be $500M and the company will be able to
produce $150M - $200M in cash flow and lets assume after tax
$60M-$70M of net income and we need $900M market cap for the
first set of warrents to get in the money, then we could be ok.
I just hope not too much dilution comes from management and their
options (god only knows what they did so well for this company,
but that is a different question).
If I assume 7% dilution (equity level only) then we should have
$942M market cap to have something in the money.
At $70M net income (p/e of 13.5) and $175M cashflow we should be
ok for $1.5B within a year or so.
I am being conservative in my assumptions. the cashflow could be
quite higher , but I am adjusting to cyclicality.
Good luck to us.
Can anyone summarize the terms under which the different classes
will get to buy/receive the new stock?
thanks.
I know it does not make a difference any more, but a few
observations should have been made a long time ago in the bk
process:
1. chemtura's biggest problem (glk and crompton) have always been
management who tries to compete in 50 markets with 50 companies
better equiped to compete than glk or crompton.
nothing has been done about that.
2. chemtura is 3 different companies with nothing in between them
except for name:
1.great lakes should go back to its core of doing basic chemicals
(just like albemarle) and leave all the consumer brand name to
companies who are at that market.
btw, I am suprised nobody is looking at what albemarle is doing
right compared to what great lakes was always doing.
2.agroscience should be marketed (they tried it once, but over
the last 2 years they missed the biggest opportunity with
makhteshim agan of israel who was looking to get more into the
US market) and if not sold it should be combined with someone
else in order to get scale and more products and gain better
access to other markets for their niche products.
they are not large enough for serious r&d, so they will end up
being unprofitable second grade unless something changes.
3.rest of former crompton should be looked at part by part to
combine with someone else or sell as it does not have critical
mass.
It is a shame that the distress investors who are financial and
strategic will not question the existance of chemtura as is and
as a result I do not see how the different parts of this company
can reach even part of their potential.
I, silly me, thought that that is what bk is designed to do.
instead we have the definition of insanity by continuing a failed
model.
I have some shares which I bought after the por was confirmed
for about 40 cents. I consider it gambling money, as I see in the
near future how other companies might go after chemtura for its
different pieces trying to them (the ev is a jock, so there is
lots of room for companies to offer higher numbers for the parts
and still be low).
I am an Israeli, so I would think that maybe someone like MA for
the agrochem, ICL (which already owns the former astaris and
competes on the bromide side) for the bromine and flame
retardents and they could get someone else for the polyols.
Anyway, just a few quick thoughts on the matter, which I am amazed
that all the highly paid investment bankers and managers never
explored (especially after the legacy liabilities are going away)
Made a mistake typing. kronos has more sales than tronox by
close to 50%. still. my point from before is valid but wanted
to correct myself.
I tend to be on the conservative side, so I know exactly where you
are coming from. Putting that aside, the valuation for tronox
seems rather low. kronos has ev of close to $3BN before the
offering with the same amount of equity and with 50% more in
sales than kronos and kronos has the advantage that, being after
bk, they just cleared any legacy liability they had and the
favorable terms on their bk exit loan will increase cashflow
going forward by quite a bit.
I have no clue about how the process will end (I do know how
corrupt the legal system is), but it should be hard to not look
at any comperables, especially if former equity holder could
potentially hold everyone else hostage and keep the distress
investors from their loot.
Hope I'm right, but I can fully understand where you are coming
from.
I actually do have a decent day job and from that job I have been
looking at how this company has been not going anywhere.
That is why I decided to have a look for myself how certain things
could be done better at one of the units.
I have been looking for a while at what and how that unit does
stuff and I do believe that they can be improved by a lot if
being combined with a company that I can indirectly reach, but I
would need to get directly to someone at chemtura.
I am trying by myself to do that, but I am also looking for
shortcuts.
I like your attitude of complaining about how things are getting
done or not at the company (and the results of that), but when
someone tries to actually do some thinking you just can't help
yourself.
Anyway, if what I try will prevail you will have a bit more value
to your shares and every stake holder will have a bit more to
fight for.
Hello to everyone on this board. I am a small shareholder, but
have also been watching this company for years from the side
(actually always looked at crompton and great lakes).
I have a certain idea about a business combination which might
be of interest for one of the chemtura units
(I actually have a person which I know and who knows people at the
other company who told me that if I can get him someone at
chemtura which can make a decision or address him to one such
person he would get that company to contact chemtura).
This combination might be able to enable the unit to become more
profitable and generate some immidiate cash for the company.
If anyone could supply me with e-mail address or direct number
to such a person I would appreciate it.
Disclosure: I am not trying to initiate any very large
transaction, so this should not influence anybody's decision
regarding investing in the company. this is a long shot, but I
keep hearing from anyone I described it to that it makes sense.
Thanks in advance, Ofir.