Great questions. I don't think anyone has great answers.
The initial assumption here seems it was that the transfer of assets was done only to artificially pump up the valuation, expecting the assets were not actually worth that. The story that it was done to somehow insulate PGPM from operating company liability... give me a break. Now, it looks more likely they knew the assets were actually worth a lot more than they were valued at in the transfer... so the transfer equates to an outright theft of about 1/3 of their value in the effort to transfer them to Lariat.
As far as the face value of the note, though... If the assets were valued based on having the 4 million barrels of oil that are in the Gustavson report, oil worth $400 million in the marketplace, that makes $40 million the right price to pay for them... that being the industry standard that you should expect to pay, around 10% of the per barrel value for proven barrels in the ground. You won't get the full market price for barrrels of oil you still have to pay to get out of the ground... with the risk you might not get them out. Still, the Gustavson report didn't seem solid enough to justify paying that price, which is why the assumption was that it was a move made only for accounting purposes, to value the assets by having a transaction that shows their value show... even if the "transaction" was a sham between related parties.
The "real" story seems to be that the value in the Gustavson report is a fiction only because it accepts more risk than it should for a P50, excluded existing production, and excluded values from Barnett Shale potential. Management may have inside information that allowed them to see a larger value based on actual production potential and Barnett potential, and they used the Gustavson report to justify transfer of that larger value to themselves at below market prices.
The rest, of course, is all that really leaves you with is a fairly strong expectation that you can count on only one thing here... that you can't trust management very much, except that you can trust them to not be trust worthy.
It is still an open question what it is that you should trust them about the least....
Is the whole thing a scam ? There is no 4 million barrels, and there is no Barnett potential, and they are selling shares like crazy now in the typical pump and dump ?
Or, is the value real, and the reason you shouldn't trust them only that they are trying to steal big chunks of that real value from you by transferring it to Lariat, and then again by transferring it to ACLE, and again by diluting PGPM as the shares are bought by Lariat and ACLE ???
Buying shares here is really rational as an investment only if you are betting that the story about the Gustavson report potential is real, that the story about the Barnett potential is also real, and you believe that management won't succeed in stealing all the value there is to be had before you get your ACLE shares and see them appreciate. Then, you might see that their effort to steal the 1/3 they have already is actually an indicator that there IS some real value to be stolen... and that the effort to move it up market to increase its valuation makes sense only if that is the case... that having stolen it, they need ACLE as a vehicle to monetize what they've taken.
You might make another argument based only on the market dynamics and the move up market... so that whether or not it is a scam, you would be betting that the move to the next rung up in the market ladder might make it a more successful scam which could sustain higher or rising share prices. The case could be made that the shares now represent a good potential value only because the PGPM scam is so worn out... because the dilution factor in PGPM interferes with undertaking any rational effort at valuation... that might otherwise allow novice investors to miss the indicators of a scam. Moving the tired act to a new venue in ACLE might allow a new CEO to promise there will be no dilution... and have people believe him. You would in essence be betting that retreading the scam will allow it to work again... only this time you'll be getting in on the ground floor, instead of at the peak.
The share price reflects the normal market risk of an oil exploration company, but also reflects the risk that the whole thing is a scam... that there is no Barnett potential, that there is no 4 million barrels in unfound oil, and the only value is in stripper wells putting out a barrel a day... which might pay the electric bills and employees, but won't reward the investors. It also includes the risk that it doesn't really matter what the value of the assets is, if they print shares faster than the value can be recognized.
My own opinion is not fixed... but is sort of a hybrid of all the potentials and risks... It leaves me thinking that the market dynamics arguments for ACLE probably tip the scales of the balance on the side of considering that this might offer a decent return from a trading position... if only because the level of fully justified mistrust I see here in PGPM seems it might actually out strip the level of larceny actually being intended... at least by a slight margin. I think there has been a fairly active and intentional effort to encourage an excess in undervaluation... in order to facilitate the transfer of value at below market prices... and that there will not be a similar motive when the transfer to ACLE is completed... That doesn't get PGPM from where it is to a value of $0.30, but it could pretty easily get it to $0.03.
JMHO, warts and all.
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