sale of 25% interest in bowland prospect, page-23

Striebs,

In terms of retail investors having to stretch themselves, think of it in terms of an option you can exercise but can't sell. Ajl shares will trade ex entitlements on Monday 17th and new insto shares from the 27th. The retail offer closes on 3rd July. Therefore there is plenty of time to see where the stock trades to see if there is any value in taking up the entitlements. If it trades above 1.20, you could sell existing stock on market and take up the entitlement and lock in some gains without adding to your position if you want. Or if the stock trades below 1.20 before the 3rd July, either buy on market, or not participate in the offer. New retail shares trade 17th July, so things could get awry in between, but by then the bgs report is due, and can hopefully offset any technical weakness from an overhang of newly issued stock being sold on market.

As for the capital position, it's not out of the woods just yet. Many of the arguments posted about the increase in cuadrilla carrying value being viewed as a solution to gearing is factually correct (debt to equity will be lower) but its more about liquidity and capital intensity. If debt cannot be serviced your debt to equity is irrelevant. Net debt to ebitda is more relevant and will be circa 3x if the operating biz hits guidance. Even then the operating biz is capital intensive and requires cash reinvestment which must compete for funds with having to pay for interest on debt. Cuadrilla might not have significant cash calls for a while now, but if operating ebitda keeps disappointing, expect another capital raise to come. Even at zero debt, having negative ebitda creates the risk of potential further raisings. That's why getting back to operational profitability is absolutely key for shareholders..

My view is that if it gets to the production stage, either ajl will either raise more to fund, sell their stake in cuadrilla/bowland or structurally separate from the operating business.