Just a bit of "fun" with words and messages. Hope it offends no one.
Dear Fellow Shareholders,
As you are painfully aware the O&G business sucks right now. This time of depressed pricing, almost 2 years now, has caught most all of us (E&P, Service Companies, Finance Providers) completely unprepared to deal with the new economics of supply. Revenues have gone down the gurgler which has presented us with challenges managing our Liquidity, Debt and funding our Capex (the topics of many water cooler discussions about town).
Fear not though. Adversity brings opportunity. We shall likely recapitalize our company! New capital (sorry to our loyal long term holders about the price at which this new capital is being brought in at) will allow us to continue with our core strategy of expanding and developing our Eagle Ford Shale portfolio. We might even be able to make an acquisition with this new capital that will improve our valuation metrics so you will be rewarded that way.
We continue to use "Successful Efforts Method" of accounting, as many of our peers do, to calculate impairments (using undiscounted future net revenues) the timing of which is also a more "relaxed" standard than the alternative Full Cost method as it tends to be more beneficial to "Book Value" of assets, especially in a weak pricing environment. Impairments reduce the Book Value of our assets, which then reduces the Book Value of Shareholder Equity which could become a problem for financiers when looking at the Debt to Equity ratio. Still we are not anywhere near the leverage multiple of our (bankrupt) peers. That's a good thing, right?
Turning to Q1 results, weren't our cost reduction efforts outstanding!!! We didn't bring any wells onto production in Q1, hence the decline, but don't let that rate of decline concern you as we are reaffirming our production guidance for the full year as well as our Capital program and EBITDAX estimate. Don't ask me how. I said don't ask!
We can't predict or give guidance as to the pricing of the commodity cycle, nor are we able to provide any details for the guidance we have given for our company's performance in 2016. Bit of a stab in the dark really, as we prefer that you don't do any research or modeling of your own to challenge our assumptions or guidance.
Look on the bright side - no short term bonuses were paid - like I said at the outset we feel your pain. The Board, the Mgmt team and all our staff work hard each and every day creating opportunity and value for this company which will reward our loyal and patient shareholders (eventually). Unless of course you bought a stack of shares during the recent rout to ~6cps and then sold them at ~ 27cps a few weeks later. Please consider doing that again but at higher prices.
There is so much more I'd like to say but I can't. So in closing
Live long and prosper
To infinity and beyond
Trust me.
Sincerely,
A. Chairman
Tough business to be in right now. Even tougher to pick the equity winners and losers.
SEA Price at posting:
16.5¢ Sentiment: None Disclosure: Not Held
