Personally, I don't understand the rationale that because a debt facility has been agreed the stock automatically rerates and flys to 3cps
I get it that it (may potentially) removes this CR overhang that hangs around in micro-cap stocks such as AKK and CTP (speaking of the CR devil). But that's not what's important IMO.
What's important is what the company does with its capital (from all sources of cash flow, equity and debt). With debt there may be some stringent covenants - all depends on our lender(s). They aren't going to give money away and surely by now we have all seen enough examples of what happens when debt covenants are breached or debt cannot be serviced or renewed.
What pushes AKK to 3+cps is:
1. Production growth (to our NRI please - don't give a hoot about reporting 100% WI numbers).
2. Positive and growing EBITDA - showing the properties are making money. There will be some sensitivity here to obviously oil/gas prices received (not in our control) and our LOEs. Looking pre our G&A overheads.
3. Rightsizing of D&C obligations (going to be tricky as HK controls pace) but we can slow down Pathfinder if need be - and JVing that with the right partner would really juice AKK SP.
There is a whole universe of E&P companies to invest (gamble?) in and understanding how AKK compares to its peers and I think it compares favourably at present - so I'm invested.
AKK Price at posting:
2.0¢ Sentiment: Buy Disclosure: Held
