American Energy Production Inc(fka AENP)

[balloonman]

This morning I dialed Joe Christopher’s number for the first time ever (972-386-0601). I was surprised when he answered. After identifying myself, he asked if I could call back because he was in the middle of a company meeting. I said sure, but since it was a company meeting maybe we could talk briefly because what I wanted to say had to do with company business. He agreed, so I expressed my discontent with the company’s general lack of communication, especially at critical times, and my view that the way the RS has been presented is ill-conceived and confrontational. He responded amicably, in a civil and even friendly manner, but with nothing of substance. I asked if there would be a PR this week and was told “no, but soon.” When is soon? “As soon as we can get it out.” I also asked if it was true that yesterday he told another shareholder (AlanK) that he believed CB ought to own 50-100% of AMEP. He said yes. We began talking about that and JC finally said, “Well, CB’s right here, you can talk with him about it” and he promptly passed the phone to CB!

CB asked why I was calling and gave me a chance to tell him of my discontentment with the company and to say that it appeared the majority of shareholders felt this way on the two main issues (poor communication and the RS issue). He told me he knows that more than half the shareholders support the RS. He went on to say many things, summarized here:

-He eats/sleeps/breathes AMEP 24/7.
-He wants to take AMEP to an AMEX and eventually a NASDAQ listing.
-Being a public company is why the company needs money now to grow.
-It’s a fallacy that banks will readily loan money to oil companies.
-It would probably cost $250,000 just to meet bank requirements on reserves.
-Banks will only value reserves for about $.50 on the dollar.
-Banks need to be repaid (!).
-AMEP is not structured to borrow and HE just plain doesn’t want to.
-The majority of shareholders are for the RS and will vote yes.
-The majority of shareholders are satisfied with the communication.
-He’s gone 9 months without taking salary.
-He deserves to have his preferred shares unaffected by the RS, he deserves better compensation for his work.
-It will take 8 years even at the fastest rate possible to liquidate his shares of AMEP, if he decides to, by which time he hopes to have grown the company tremendously.
-There will be no revision to or retraction of the RS proposal.
-If the RS is voted down, that will result in the end of the public company.
-A $2 million note is due on July 15th; if not paid, AMEP will lose the underlying asset and this will be a sign of things to come.
-It is not worth leasing out one of their drill rigs because that would limit their expansion plans and interests.
-AMEP is not interested in anything other than the RS for financing.
-Since the SEC made no comment on the RS, they view that as meaning there’s nothing wrong with it.


Some of my responses and points:

-Comparing AMEP with DAL is nonsense (he brought that up, sabre… ).
-AMEP is being run like a private company, which it is not.
-The way the RS is structured and the Q&As as listed are more like a threat or ultimatum, not a well thought out plan by a responsible management of a public Company.
-The majority of shareholders probably agree that CB deserves greater compensation, but it should be tied to performance of the company.
-There are other and possibly better ways to finance the company than by RS.
-Shareholders deserve to be considered as partners, not divided by an US against THEM mentality.

CB invited me to come to Texas for a personal tour and lunch, to get a view of the company that can’t be found on Raging Bull! No kidding.

I asked CB if he wanted to continue as a public company, to which he easily replied, “Yes.” So I closed by suggesting that he and the AMEP management would do well to listen to shareholder complaints about the major issues and seek resolution instead of confrontation. We had talked on the phone for 45 minutes!

In short, it was a ‘nice’ conversation but I didn’t feel like anything I said was heard. CB’s mind is made up and that’s all there is to it, end of story.

Based on this one conversation, I understand why others who have met or talked with him believe that CB’s heart is in what he’s doing. That’s nice, but IMHO that’s expected, it does not give him any right to ignore the best interests of shareholders, nor to grant himself unreasonable compensation or to effectively blackmail shareholders into giving him his way. I have called CB and JC thieves for trying to put one over on us, but it would probably be more accurate to say that they are probably just piss-poor managers of a public company and believe they are justified in what they’re doing. They’re probably also doing their best. No matter what the intent, my view is still that it’s in our best interest as shareholders to decide how we believe it’s best to steer and grow this company, including consideration of the fact that CB seems intent on having his way or packing up his marbles and folding up shop. I would also say that passage of the RS probably won’t be the end of the world or spell doom for the SP, because if CB is as sincere as he comes across then shareholders will benefit in spite of his selfish motives.

Nelderand, you mentioned the possibility that CB’s preferred shares were not created in a correct, legal manner. My suggestion is that you, or someone else ’close to the company’ research and pursue that ASAP. If it quickly came to light that those shares are not legal, CB would certainly want to change the RS so he could be compensated in some other manner. It’s a longshot, but worth pursuing if it resulted in their yanking the RS and then proposing a plan more reasonable for shareholders for financing and compensation.

Also, since CB’s and Nelderand’s numbers don’t jive, in regard to support for the RS (or satisfaction with communication), maybe we should all consider showing our cards before the vote so we will know what the outcome will be, if everyone is above board. Yeah, right…

Looking forward to reading of people’s thoughts about what to do. Still I strongly urge anyone who hasn’t already done so to contact the company and speak your mind. Call and email:

http://www.americanenergyproduction.com/contact.html
[e-mail]
[e-mail]
Joe Christopher's phone: [phone]

Happy 4th of July to everyone, may all that Independence Day represents grow in strength in this country once again. Go Ron Paul!