I, too, will vote “Yes.”
DIFFICULT OPTIONS.
AMEP shareholders must realize that things simply aren’t as we’d prefer them to be. AMEP is not (presently or yet) a significant player in the Barnett Shale. But the company is way out in front of most other local O&G start-ups. The contrasts between the revenue-generating big players and the smallest leaseholders who have no options other than contracting out the drilling on their leases are significant. AMEP, with its 7000 acres of leases and two drilling rigs is in an ideal situation – if it can, somehow, bring future wells into production.
But presently, AMEP cannot generate any significant operating funds. There is no doubt that the company has at least three wells (the Padgett 11 and 12, and the Mississippian High gusher) that will, in time, produce significant operating funds, monies which will underwrite many future new wells.
But revenues from raw oil and gas sold by well-owners isn’t received for many months after the fuels have been delivered. That, as I see it, is the essential, immediate problem AMEP faces. It’s got wells that can produce, with many, many more in the future. But there are no significant funds with which to drill these future wells. What, then, might be the options?
OPTION 1 – Wait for Revenues.
This is the go-slow and steady one, just plug along and cobble together some piping at the present wells, sell some hydrocarbons, and wait around until fall or winter for ample new revenues to underwrite the new drilling projects. In a year or two, some new wells can be drilled.
OPTION 2 – Bank Financing.
The second option would be to go to a bank and take a loan or line of credit against the company’s assets, the leases, the three wells, and/or the rigs. Use these funds to finance the required new drilling.
OPTION 3 – Sell Additional Authorized Shares.
AMEP can apparently sell some 6 million un-issued new shares, shares not yet on the open market. Such sales would max out the 500 million authorized shares.
OPTION 4 – Do a Reverse Split, Then Sell the Unissued Shares.
Selling 6 million shares at 2 or 3 cents would yield $120,000 to $180,000. Not much to support new drilling. To increase the value of the 6 million unissued shares, conduct a reverse split. At a one-for-25 RS, 2-cent shares would be worth 50 cents (if arithmetic were the only factor). Three million dollars might then be realized.
OPTION 5 – Do Nothing, Turn Down the RS.
This might appear to be Option 1, Wait for Revenues. But it’s not. A shareholder rejection of the RS proposal will indicate a majority shareholder dissatisfaction with the Board of Directors and company officials. This will cast an ominous shadow over future company operations, such as the acquisition of new leases, collaborative drilling operations, or other similar projects. There is no reason to believe that the failure of the RS proposal would, by itself, cause the share price to increase. All of the existing problems would still remain.
OPTION 6 – “Kick ‘em Out.”
This is the second best way to sabotage or stifle the company’s (and shareholders’) progress. Every small company, whether the Ford Motor Company in 1920, or AMEP in 2007, is the result of and dependant upon one or two crucial “insiders.” In this case, like it or not, AMEP is Charles Bitters, Remove him from the company and AMEP will be no more. Only the undeveloped and unused assets would remain for auction.
OPTION 7. – “Sue ‘em.”
This is the playground bully’s option, one which will benefit only the lawyers on both sides. Just how many wells do you believe might be drilled after legal papers are delivered to all cogent parties? Everyone (except the shareholders) will immediately begin to project their own interests. The shareholders will be the lowest on the ranked list of interested parties. The first call for funds will be from the lawyers on both sides. Next, the company assets will be sold off to cover the costs. Last on the list will be the shareholders, who might get a penny or two per share.
THOSE ARE THE OPTIONS
Those are the options I see, and not a one is ideal. But like most investment decisions, I must choose the one that will benefit me the most.
Option 1, Just Wait, might work. But the company, for its good reasons, has elected not to go this route. In honesty, Just Wait is not an option on the table. The Reverse Split proposal takes this off the table, like it or not.
Just Wait is no longer an option.
Option 2, Borrow. Frankly, this looks to me to be a very plausible option, one that should be seriously considered by the company. But I’d be a fool to believe this hasn’t been considered. The risks against the collateral assets, along with the burdens of future indebtedness must be too great. And, staying out of debt is a major advantage for small, start-ups.
Option 3, Sell Some More Shares. As stated, this will raise just a few hundred thousand dollars, an insignificant measure altogether.
Option 4. Do the 1-for-25 RS. This looks like it could raise several million dollars, without increasing company debt.
Option 5. Vote Down the RS. This is Option 1, with a tainting twist. This will turn away future institutional investors and pretty much relegate the share price to the pennies for the foreseeable future. No new funds, no immediate new wells, no investor confidence, all with a continuing low share price. I can’t for a second see how the defeat of the RS proposal could increase share prices.
Option 6. Dump ‘em. This, in effect, would be an external dissolution of the company. After everything is sold off, how many pennies does anyone think will roll down to shareholders?
Option 7. Let the Lawyers Win. Same effect as No. 6, but worse.
So, with a bit more than one-half of one percent of AMEP’s outstanding shares, I will vote FOR the RS proposal. It offers the best and highest returns to me in the future.
By this measure, will Charles Bitters gain up to 30% or so of the company’s shares? Perhaps. In three to five years, when I see AMEP trading (pre-RS) in the $5 to $8 range, these numbers will be somewhat reduced, perhaps into the $3 to $6 range. But how do either of these projected share-price ranges compare to those that would result from any of the other on-the-table options?
Like it or not, I see the passage of the reverse split proposal as the only option with the highest chance of substantial return to me.
I learned a long time ago that the lessons learned on the playground, usually by playing (and losing) marbles with bigger kids, don’t serve my financial interests in the stock market. Some here are bitterly angry with Charles Bitters and others. They will allow their human emotions to intervene into what might be in much better options.
Each AMEP investor is free to choose his own option, for his own considered reasons. Here, I’ve outlined why I will vote for the RS proposal. I wish there were other options that could better support my financial goals, but they simply don’t exist right now. Considered reality (not emotion) intervenes
I encourage each shareholder to do as I have done, to a) list out the known options, b) list the probable outcomes, and then c) determine how each of these outcomes will affect the AMEP share price in two or three years. I have done this, and the option that works best for me is a YES vote.
Sincerely,
–Falconer66a
