Replies to post #29951 on Treaty Energy Corp. (fka TECO)

[dloggold]

Blind do you think the stockholders will be told the name of the investor? Do we have a right to know? Just curious

[MightyMac]

No, I'm not kidding. The greater the probability of success, the less risky the loan.

If I had the money I'd make the loan myself for 12% secured by sufficient stock to assure I get repaid my loan principal and interest. If it took 40,000,000 shares to do it, so be it. If the price per share falls, the investor still can collect by suit against TECO if the 20,000,000 shares are insufficient to pay the debt. Basically the company itself secures the debt.

I see no reason for the 5% overriding interest being paid in addition to 12% interest. Many property owners who lease their land get only 1/8 overriding interest (12.5%).

Generally speaking an overriding interest is a percentage of the gross revenue and you do not subtract costs for drilling, transportation or labor; this figure comes from the total gross revenue of sales before expenditures.

Thus the lender will most likely get paid 5% of the gross revenue even if the production costs eat up the company's share of the gross production.

Adding another 5% overriding interest for life of the five wells, which can be in the millions, in addition to 12% interest guaranteed by millions of stock shares is overkill.

If it is a high risk rates have to go up to get the money. Here we are talking about financing five wells on top of 12 wells. If the first 12 become commercial, or even a high percentage of them, better loan terms to drill another 5 wells could be negotiated as it would be shown risk is less to repeat the process.

Regardless of risk or success in the five wells, the investor is guaranteed principal plus interest return on investment by stock securing the loan.

I simply see the 5% overriding interest as being unnecessary if sufficient stock is provided to guarantee the loan.

I hope TECO just signed a commitment with the lender to get the funds on the terms specified should TECO decide to take the money. If the first 12 wells are a success, they should be able to get the loan money elsewhere on better terms, or even with this lender on better terms

When the loan is paid, the 5% of the gross from the five wells should replenish the corporate coffers. Meanwhile I keep adding more TECO to my portfolio as I have a lot of confidence in this little company.