Took a few days out to see how things would unfold.
Management and board Happy to see the board take a cut of 50%, but this shouldn't be for 6 months. This should be permanently and half of their remuneration should have been linked to share based performance. Echoing others, management remuneration and roles need to be slashed asap. There will be no opportunities for Otto in this market. They are capital constrained and need to focus on running a lean organisation - this means reducing MA's salary by half (which would still be $500k AUD!!!), eliminating CFO, Company Secretary, Geo roles in total. Outsource basic accounting functions for $20k per year and run the business for cash.
Total savings would be c$2,000,000m USD per year. Or c$3.5m AUD. About 1/4 of our current market capitalisation.
Their update is piss poor to be honest. They even made a reassuring mistake that our assets are "low margin"
Production SM71 Also glad to see they are reducing production down to rates hedged rates as i queried with management two weeks ago now. Frankly, i think they should probably shut all production in if it's not too expensive and simply cash in hedges as they settle. If we are only receiving $14-$16 a bbl, the margin is c$2 on a production basis. That doesn't make sense. Shut it in if can be done and save the oil for a better day....would management still produce if prices were negative? Even though we have the swaps, it wouldn't make sense. They would make more cashflow shutting in.
Lightning Shouldn't be as adversely affected but pretty annoyed with management for not taking out forward strips a couple of months ago. Average forward strip was around $2.50 USD at the Henry hub. Although it appears we get a premium at Lightning, it's marginal at best. $1m net cash per quarter at current pricing with two wells on? Probably less.
GC21 No comment, out of our control but i expect Talos to lead the way on this. We should not sell any stake if don't need to. If we did, wtf would the capital raising be for?!
Capital raising What a disaster. I have never in my life seen such a f up.
From the reassuring announcements, to the terribly outdated, under informed, presentation, it's got to be some of the worst management performance i have ever seen. Sure, the world markets tanked and oil is in chaos. However, we were meant to be safe with hedging and i haven't see any other company suffer as badly. Not even FAR who is in way over their head!!
Institutional - So we have seen the institutional book build disaster which is basically just Molton. They can't get any further shares apart from on market.
Retail entitlement - I hope that all retail holders buy on market at 0.5 cents rather than provide management with any further shares. This is three fold: 1. It's 17% better value buying on market at 0.5 cents. 2. Management would get less funds and receive a clear message to get their act together. 3. Euroz, being the partial underwriter would become a substantial shareholder along with Molton and Perennial. Perhaps these three combined would be able to roll management and the board to get real change. I don't believe Molton could ever be happy with the situation either...
One question i have, can Molton end up with more than 19.99%? It feels like they will end up with more than that easily.
The other question i have is, who is selling on market? Almost 10% of shares on issue dumped at 0.5 cents. Is this Perennial getting out?!
I bought some at 0.5 today because YOLO. I don't have hope to get my original investment back, but i think 1 - 1.5 cents by the end of the year could be achievable barring any major f up's by our esteemed top notch management and board.
OEL Price at posting:
0.5¢ Sentiment: None Disclosure: Held
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