The problem with the SP with MEL is they always are operating with a minimum amount of cash in the kitty . Last quarterly they were down to only $102k.
They raised $2.7 million immediately after qtr end at a discount of 20% to the current then SP. They stated that $1.5 million of that was to complete the Valli 1 hookup to production 750k for Renewable project and 450k for Odin long lead time items and planning . The Renewable project has been canned , RIP!! ,so they should have enough cash to get to first production .
However first production is not first revenue and the revenue from one well at contract price and unknown processing cost will be relatively modest . They still have the other wells at Valli to hook up that do not seem to be in the budget yet or the Odin hookup and facilities .
The next quarterly will be informative . They are debt free and their strategy of " Just Enough " small raises I think is designed to minimise dilution before first revenue . Don't think we will see a big jump in the SP until we see a quarterly with decent free cash flow that indicates the business does not need credit raises to move ahead or at least credit raises at a higher price that better reflects the value of their assets .
I think the JV will go for another GSA with prepayment for the Odin gas but prices have moved up and their bargaining position is much stronger than last time .
MEL Price at posting:
2.2¢ Sentiment: Hold Disclosure: Held
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