Replies to post #6881 on Worthington Energy, Inc. (fka WGASQ)

[xZx]

great post here -- this is exactly how i'm visualizing the growth strategy, too. those 8.53M in assets on our balance sheet will climb just that much higher when mustang island becomes a proven resource, flowing barrels per day of oil and nat gas.

I-1 will certainly be leveraged to develop all our other leases, too. you know that's in the plan mason has cooking.

the market will always pay a premium for a cash-flowing enterprise, and conversely, speculators get an extreme discount for taking on the risk of a turnaround venture like this.

after mustang's I-1 is flowing, how risky is that? not very!

this concept is what the fast money doesn't get, and probably never will. by the time WGAS has paid down all their debt, and have a few properties producing, it won't be a sub-penny stock anymore. it's going to be around a dime to a quarter a share, and that will be our baseline, the "foothills" on the chart. jmho.

[Norton1973]

Yes, I like this excerpt from Tony Mason Blog:

Tony Mason - CEO August 19, 2012

A very crucial part of our initial development strategy, from which the Company intends to develop meaningful (cash flow), is the development in shallow, near production oil producing assets. What is critical in this early stage, is the control of Operational Expenditure (OPEX).

http://wenergyinc.com/recent-updates/the-i-1-in-the-final-12-hours-of-platform-work/

[GS1]

Jakson, great post.

At this point the company has to reduce debt and maximize revenue stream. Their major revenue will come from VM 170 which they haven't started drilling yet. For I-1, they will have to wait for another couple of months to get any revenue. They will need working capital to fund I-1 to some extent and for VM 170.

The best case scenario in my opinion is for them to figure how much working capital they would need to continue operation normally. i.e costs for 3-6 months. This will include if any capital needed for I-1 as well as drilling costs for VM 170 until it gets to production and get Bank loan.

Based on their past history they have relied on third party lenders who always have equity interests which means issuing more shares or paying higher interest rates. There are exceptions, but generally speaking.

Bank loan is interesting because you will get loan and you have to pay interests about every 3-6 months. The interest rates are typically very low 5 to 10% and that is what this company needs time to repay. That will allow them to stay afloat and jump start projects that are pending. Once it is in full production mode, they will generate revenues and able to pay down interest, no dilution and no revenue interest split on wells.

I have personally seen companies do equity financing through venture capitalists and also succeed. The flip side they issue more shares and drive down PPS to ground and when company starts producing revenues they buy back shares as PPS is low.