Share buybacks for a negative EV company ??

Hi all,

We're in a bit of a news vacuum waiting for the quarterly...so I thought I'd do a bit of a hypothetical brain exercise regarding share buybacks.

Pretty sure everyone is familiar with the concept of a company buying back it's own shares using surplus cash on the balance sheet.

Pros - reduces SOI, and hence increases Earnings Per Share. This generally places upward pressure on the share price based on these fundamental metrics, not withstanding the increased buyside activity on-market.
- This increase in shareprice is largely considered to be much more tax efficient than returning capital to shareholders via dividends, and additionally dividends go to all holders regardless of their investment/tax strategies whilst participation in any buyback is optional for each individual holder

Cons - if a company uses too much cash in their buyback, it can weaken their balance sheet and leave them unable to participate in future growth opportunities. It could also signal that the company may not have any favourable opportunities in their forward pipeline that are worthy of investment and generating future earnings

So, how does this relate to SHE and our current predicament of positive recurring cashflow, excess cash on the balance sheet (above Market Cap, hence the negative Enterprise Value), and seemingly unwillingness to commit to future capex investments??

I've never before seen a sharebuy back at a valuation of less than cash backing. Hence this is new territory for me. But in theory SHE would be buying back shares that have MORE cash value than what they are paying, and hence its extremely value accretive to the remaining owners of the business!!

Lets assume SHE buyback 5% of the existing 684m SOI (34.2m). Now we know there is not much liquidity in the offer depths, and this will push the sharprice up as the company purchases...let's say to around 2.2c (this is the hypothetical part, and I'm making assumptions !!). Let's say for arguments that the VWAP of these shares is right at the top price because shareholders want to realise top value. So 2.2c per share for 34.2m shares is $752k

This is a tiny dent in the campanies current cash balances and likely to be fully funded from operational cashflow during the time it takes to run this process. Hence the majority of cash is still available for future capex investments in new wells...and yet the shareprice will be somewhere around 57% higher than current!!

What other capital investments could the company make for $750k that would increase the shareprice by over 50% ??

The proforma position would be 650m SOI at 2.2c = $14.3m market cap with still a huge amount of cash remaining...!

tldr: David - please do a share buyback for 5% of the SOI