Swift Energy fka SFYWQ

[LouisDesyjr]

Common shares expected to be worth less than $0.07

Using very rough numbers, I believe that the old common stock is worth less than $0.07 and would not consider buying unless the shares were $0.03 or lower. (And even that is a risk since it is very uncertain what kind of numbers the company will generate going forward.)

Sources:
http://www.swiftenergy.com/menus/IR-Recent-Fundamentals.htm
Most recent financial statements for period ending 09-30-2015

http://www.swiftenergy.com/ABOUT-SWIFT/RESTRUCTURE/q-and-a-documents.pdf
Q & A about the Chapter 11 filing

Discussion:
The company has done a 'prepackaged' Chapter 11 filing where the senior note holders are converting their notes into 96% of the NewCo equity. That will leave the existing shareholders 4% of the equity in the reformed company.

The company lost $354 million in the most recent 10Q report. From that we can see what the company could earn on a quarterly basis by backing out the write downs of $321 million, interest expenses of $19 million and depreciation of $35 million. That would leave the company cash positive of $21 million, annualized that would be $84 million. If we apply a cap rate of 10% to that, that would give the company a valuation of $840 million. 4% of that is $3.36 million.

With the shares trading for $0.14 for a market cap of $6.24 million, the price would have to be at least 50% lower before it can make any sense to buy the shares, plus the shares need to be lower than that to have a 'margin of safety' with all of the problems that the company can be expected to have or actual valuation that the company may end up with. As a result, I would not buy the shares unless they were $0.03 or lower.

While there are warrants as part of the deal, those may never rise above their strike price and should not effect the calculation that much.

Louis J. Desy Jr.