Hard to say MM ... there is no surprises (for me) in the report. I bought knowing full well the potential existential threat to SSN if MOB is non-cooperative and TB doesn't find a syndicate willing to back him. I think that is downplayed (or not well understood) by most investors though.
TB's immediate concern is the OAS note and the "plan" is to get MOB to increase credit facility to say $25M on the back of SSN's (mostly) successful work on raising PDP Reserves (still have to prove lower cost now that water has surfaced as an issue). Surely TB has a Plan B if needed which is not sell out of FB. This is raised as an option if a longer term larger facility is not offered. Trouble is, most likely SSSN will be in default and so MOB could take control, "sell out" to any DIP lender and they would restructure SSN with existing equity holders receiving nothing.
On the other hand ... the FB development plan looks "solid" and ought to be financed .... however the 3.5x EBITDA multiple remains "out of reach" it seems. TB and crew are STILL paying themselves too much for the size of company and their general expenses are way to high. You simply CANNOT justify G&A of $2.5M on Gross Profit of $1.2M (on 6 months) and hope to remain in business. MOB are correct in their covenant on G&A and SSN are FAILING shareholders by not sucking it up and rightsizing themselves.
TB has the opportunity now to deliver on a turnaround plan that was begun 15 months ago. Everything is now in place. Capital is being used efficiently. They will either prosper or perish on the back of FB/MOB/and their ability to execute on a sound plan (and if oil goes back below $40 they and many more will perish and there is bugger all they can do about it).
GFTA
SSN Price at posting:
0.4¢ Sentiment: Hold Disclosure: Held
