It's a real shame! I sent a mail to management some months ago asking them to cancel all debentures in order to avoid massive dilution. Their response was that all the Company's shareholders could have joined buying debentures... well, that's not true, GDS holders couldn't!
Unfortunately derampers in Brazil were playing directly into debentures holder's hands by helping them to drive down shareprice to ridiculous lows (US$16 million!!!) and make this kind of dilution possible.
However even with this massive dilution, in my opinion PetroRio remains extremely undervalued.
Market Cap @ R$2.1 (10/30/2015) with
~30 million common shares = ~US$16 million (~R$63 million)
~60 million common shares = ~US$32 million (~R$126 million)
~90 million common shares = ~US$48 million (~R$189 million)
PetroRio's 2Q15 Cash Position (including Oil in Storage) was ~R$421 million and is likely to have increased to ~R$600 million in 3Q15 (3Q15 results out in ~ two weeks). Two factors had a strong impact on cash position. One is the ~US$27.5 million Cash inflow from Rosneft, which PetroRio should have received in 3Q15. The other is the 25% appreciation in US$/R$ (most of PetroRio's Cash is held in US$).
Oil production volume could increase from ~5,000bbl/d to over 25,000bbl/d if ANP approves the deals with Shell, Maersk and PetroBras. Deals won't touch any more of current cash because 20% of the acquisition prices have already been paid in cash and the remaining should be financed by Glencore who is the buyer of PetroRio's produced oil.
Certain individuals from Brazil will keep on deramping, but others, who already have converted their debentures into common Shares and now have entered into a 12 months “Lock-up Period” will change their "opinions" and start ramping up PetroRio, hoping to see a massive return of their investment in a year from now on.
"The shares resulting from conversion will be subject to trading restrictions and transfer for a period of 12 (twelve) months from the Debentures’ conversion date (“Restricted Shares” and “Lock-up Period”), in which their holders must not offer, sell, agree to sale, pledge, lend, lease or grant option to purchase on any Restricted Shares, and refrain from entering into any swap, hedge, short sale or other transaction."
So none of the new shares can be traded for a year from now on, nor hedged in any kind of way.
AI
