So it is pretty obvious what has happened here.
When BRK announced it's $8.25 Jewell well capital raise in February, SHE announced it's $5 million raise to participate in Jewell simultaneously. It has been pretty obvious that for SHE to participate in the Rangers well it would have to raise a similar amount, and have done it by now.
BRK are keen to keep the drilling momentum going as evidenced by what both David and Gracjan have said in recent interviews.
So,it is apparent that SHE are not going to participate in Rangers which IMO does not make any sense. In the BRK / SHE step in agreement , BRK are not obliged to invite SHE to participate and SHE are not obliged to accept any invitation. At the BRK AGM the conversations with both CEO's were along the lines that SHE was very keen to participate, and BRK were keen for SHE to do so.... so something has changed in the intervening period. What is also obvious that SHE have more to lose by not partnering with BRK in Rangers and BRK , despite some dilution with this raise will be the clear winners, especially if Rangers comes in as expected, and considering the new DSU BRK should pick up will result in ~ a 50% increase in the Rangers PUD, and almost certainly in production and cashflow.
The main question being asked is why not wait until Jewell is completed, flowing and raise with a higher share price?...People say CR is a stock price momentum killer. What is even a bigger momentum killer is waiting for a partner to get their shit together as what happened with the 2 year delay in waiting for SHE to fund Jewell, and that only happened after BRK finally relented and raised, which forced SHE to immediately come to the party.
The only answer I can think of is BRK have a tight timeline/ window for Rangers and you need to have an available rig drill slot . I suspect if things turned out as they should, SHE would have raised cash in June/ July for their participation and the rig would be secured. Waiting for for Jewell to come in may have compromised the rig slot and potentially delayed drilling Rangers , possibly Flames and that is something BRK are not prepared to do. If there is a timeframe / rig slot availability BRK are running to, then missing that rig, and having to use another operator who is not your preferred provider could set BRK back many months , and potentially compromise the outcome of the drill. .
So I am happy comfortable with the timing of the raise..... But the word on the street is a 708 only raise at 3 cents with a 1:3 free BRKOB which means the strike price is 1.1 cents. I am happy with the 3 cents but I am certainly not happy with the 1.1 cent strike price of the attached 1:3 option as that is being OVERLY and UNNECCESSARILY generous. If BRK( for calculation purposes only) raise $6.3 million with 210 million shares and 70 million options issued, assuming the options are all exercised then without fees, that eventual $7.07 million raised is at 2.525 cents which I am afraid is friggen crazy, time constraints or not. They should have created a new class of options BRKOC and had the strike price at 4+ cents. It is not a question of materiality, as the eventual total amount raised between 1.1 cent strike and 4c on 70-100 million options is not that significant in the overall context, but would send a different message to the market .
So right now I am delighted, and pissed off at the same time... an new emotional state for me
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Rant over.
Despite the frustration with the free option gift, this capital raise is another significant step in the growth of the company. DP always said BRK were fully funded to drill Rangers and they were. But you need to think about it a little. Had SHE participated at the level they should have, BRK would have been fully funded to drill Rangers, but still would have needed to raise some cash to complete the well as both drilling and completion cost ~$4 million + each, and as you are all aware, performed by different operators and paid out at different times, drilling first and a few month later, completion. The funding for the completion would have come from option conversions and some cashflow from Jewell. Since SHE aren't participating ( yet to be confirmed but pretty obvious they are not) then BRK aren't fully funded to drill Rangers, and if you are going to raise for a well to fund 80-90 % of an extended well, you better have ALL the cash to fund the entire drill, plus contingencies.
So that is where we are, and despite the option gift, (again),this raise will propel BRK operations to the next level... and if Rangers comes on line as expected with a similar rate as Jewel, then BRK will benefit from 80-90% of 1000-1500 BOEPD initial production, and an extra 300,000-600,000 PDP reserves.
Now, the only question I have is....
What the $%#@ are SHE thinking!!!!
For those guys, I hope they can offer a good reason for not going down the path they actually were set up o do and have a plan for sourcing projects , doing due diligence, because up to now, they didn't need to do any of that... if it is a good enough project for BRK then it is good enough for SHE to participate and fund... now what??
cheers
Dan
(20min delay)