capital raising, page-64

Went to today’s briefing held in Melbourne and have tried to capture as much detail as I could during the time there.

Like most posters on here I was quite shocked and angry that SSN went into a trading halt for another capital raising. Terry started today’s briefing with the background as to why the capital raising was necessary. The company will try to document this as part of the market release and I am sure will do a better job than me. It was more to do with timing and available funds than anything else, there was a need to financially commit to the next 4 Three Fork wells.

Why didn’t they use the current debt facility, they only have and initial base of $8M of which they have already drawn down $6M. To get access to the additional credit the company needs to justify based upon estimated proven reserves. This is a process that takes time and due to delays in the program could not meet the timeframe required to commit to the Three Fork wells
They considered a share purchase plan to raise the additional capital but a SPP take considerable time. The only option left was to raise $5M at $0.02 using institutional investors (not retail investors). The money will be raised in both the US ($3.5M) and Australia ($1.5M), Patterson’s is being used as the Australian partner. They are looking at a using a select group of investors, may be 12-15 with a minimum commitment of $100k. It seems that they will close the books tonight with the $5M fully subscribed with no shortfall.

Understand it is not ideal to raise capital at $0.02 but it seems that is what the market is prepared to pay. I see this as a stop gap measure to maintain the current drilling program and will discuss ongoing funding later.

After this explanation the briefing started. Terry was there by himself there was about 6 investors and a Patterson suit in the room. Terry went through the presentation that he gave to the IPAA Conference.

North Stockyard Project - He was quite upbeat about how the program was going and have a good relationship with Slawson. Explained the reasons behind selling the two Rennerfeldt wells, due to their location (corner of acreage) they are short wells and have only 15 stages. Based upon the companies calculations they believe these wells will not be economical and sold them to Slawson for cost plus $100k each. The next two corner wells Matilda Bay have been redesigned to be longer and have more stages. As per his presentation longer, more stages and proppant is the key to an economical well in this project.

Terry was very impressed with the results from the Blackdog well even surpassed their expectations. The learning’s from this well will be used in all future Bakken and Three Fork wells. He seemed confident that the Billabong well will be okay and the stuck piping will be removed, just a case of trying to get back to it.

The next 8 wells in this project will target Three Forks from two separate pads. The rig being used for the Matilda Bay wells will be moved to drill these wells.

Rainbow Project – Similar to the North Stockyard project it will have 8 Bakken wells and 8 Three Fork wells. The first well is being drilled by CLR and is expected to be spud in June.

Based upon the wells to be drilled in these two projects slide 20 of the presentation shows the expected BOEPD growth. Slide 21 then tries to value Samson based upon a valuation of $146,000 per BOEPD, June 2016 has the company with a market cap of approximately $250M. If we look at this graph and April 2014, we are at 536 BOEPD with a market cap of about $70M.

The part that I liked was Terry confirmed that with this capital raising, debt facilities and oil revenue it funds all the wells for these two projects. Therefore no additional capital raising to get to a peak of 1,600 BOEPD.

To answer the question on the company break-even point, he did confirm 400 BOEPD is the mark. He admits the administration costs are high and they are focussing on two areas, audit costs and legal fees. They are looking to try and significantly reduce these costs. He did say that these costs will not rise as they increase production, they are a ceiling and anything over the 400 BOEPD is profit.

Exploration – The calculations on the company valuation excludes any additional BOEPD generated from their other projects Hawk Springs, Roosevelt and South Prairie. Each of these projects has a well planned to be drilled this year but are all exploration wells so no guarantees.

He was asked about Samson’s future beyond 2016 and he did talk about other opportunities the company is looking into. Nothing confirmed but some interesting prospects.

That is all my notes that I have, anyone else that was there let me know if you think I have misrepresented anything that was discussed.

Tim