I'll answer to the extent information has been released to the market & apologize for the delayed reply:
Two directors, Jayme McCoy & Paul Franks, did recently sell shares and this was announced with the ASX in the last day or two. Both still retain ~6M shares each in the company. I can't speak to their individual investment/sale decisions but it is not a reflection on anything materially different with Sundance.
The $100M credit facility will primarily be used for developmental drilling in the Bakken & as dry-powder for acquisitions. We have not released timing on deployment but this is a straight senior debt deal (no equity kickers). Senior debt for developmental drilling really makes sense right now given the low risk nature of Bakken drilling and existing cash flow in place to service the debt. This reduces our equity requirements for Bakken drilling and today senior debt in the US costs, all in, around 5.5% so is pretty cheap money.
As you've noted, we have mentioned size as a limiting factor to a North American listing. In my view, a North American listing that accomplishes our objectives (improve valuation, drive volumes in the stock, and improve the company's access to capital for growth) requires a dual-listing as opposed to, for example, ADRs (e.g., Samson, although ADRs have worked well for them). To be effective with a dual-listing, the Company's enterprise value needs to be adequate to attract North American fund managers and cash flow must be sufficient to sustain incremental compliance costs. When looking at metrics available to the market surrounding these key points (for example, if you look at valuation metric differences between company's <$250M & greater than $250M there looks to be an improvement in valuation multiples) we feel we have ticked the boxes to move towards a North American listing.
On interest size, we have started moving towards keeping bigger interests. The first step was keeping larger interests in our Niobrara prospects. I expect this trend to continue - good oil & natural gas projects are relatively rare and it's cheaper to fund with debt/equity than selling most of the prospect so somebody else can get the upside.
We released cost structure information in early March in a presentation. Cost per barrel varies based on the expected recovery and length of lateral in the well. Our rationale for hedging is three fold: 1) Oil price volatility is just under 30%. Our rates of return are >45% as released. In our view, we are better off protecting the 45% return we can control instead of speculating on a 30% move in the market that's out of our control; 2) The bulk of our development capital will come from free cash flow. Hedging protects our ability to use free cash flow to grow which minimizes dilution & debt requirements for developmental drilling; 3) We have ~700 drilling locations in the Bakken. As we elect to participate in wells, we make the decision based on market pricing as the un-drilled wells' production is not hedged. Once the well is completed, we can hedge in the current price environment. This strategy gives us significant exposure to oil prices through drilling but protects already made investments.
Thanks for the remainder of the information in your email - we are always striving to improve our communications with the market & I personally always enjoy discussing thoughts with our shareholders (be they ideas, questions, or concerns). Please don't hesitate to get in touch at anytime.
SEA Price at posting:
79.0¢ Sentiment: LT Buy Disclosure: Held
