I have taken the time to share some of my due dilligence.
These guys need to deal with their debt and equity position.
equity:
shares aus 1,169,555,338 shares USA 58,500,000 total equity 1,228,055,338
Equity is exceptionally high compared to other companies if you have a look around. They have issued too much and its going to impact the company in the long term; when they do reduce debt, as it will cost shareholders an astonishing amount to purchase shares.
Debt:
debt (aus) 14,092,764
Loan repayments - principal: 200k per month Interest on both loans: 9.7% * total debt = 1.376 mil in interest pmts p/a. Which is 113,916$ per month.
Thus per month they have to pay $313,916 just in interest and loan repayments.
In terms of Cash flow from operations:
December Quarterly Production and Estimated Revenue compared to the previous quarter: sept 1,022,290 Dec 1,187,599
Thus, for the dec quarter, there will be 873,683$ remaining before other expenses and costs.
The market is obviously viewing this company as rather risky due to its going concern problems. In my opinion, with the discovered amount of natural gas in the world (which is why the price of natural gas got smashed so much).. i dont see the gas price recovering that fast in the foreseeable future. Thus going concern will continue to raise an issue in my opinion.
Furthermore, impairment of plants (primarily due to gas prices) had a significant impact on profit and loss - thus the market adjusted in sp further downwards for that reason. Nevertheless, Impairment expense doesnt mean anything in a cash flow world. The plant will still be there at the end of the day, its just worth less on the balance sheet - thus if you want to sell the asset it will be at a discounted price as impairment would be factored in. In my opinion, there will be little impairment for the current financial year - seeing a dramatic improvement in profit and loss, where the share price should see some upwards momentum.
Overall, options seem to have the most upside. If this company can reduce its debt position by 200k x 18 months = 3.6 million by 2012; then interest payments would have reduced around 500 k for the time span. Together with increasing cash flows via further business expansions, a likely increase of oil prices, and steady increases of gas prices and the economy through media hype; thus possible market bubbles, its likely that purchasing the options would be a good idea as they have a huge chance at been in the money.
In conclusion, this company has an exceptional amount of assets and management seem to be very active in drilling, producing, and in also acquiring further projects. Strong management team and reduction of debt should see this share above 3 cents in the short term in my opinion. However, debt still remains this companys major setback. Cash flow should see some steady increase as wells further produce. Though I do see room for this share price to move primarily due to its management base; I see a short term decline of the share price as the company has many of its projects spudding around midyear (major exception being one of the on shore Texas 100% owned projects).
As an investing standpoint, I wont be buying until a major contraction of the shareprice occurs.
SSN Price at posting:
1.7¢ Sentiment: Hold Disclosure: Not Held
