Reply from Paolo30 Apr 2020 08:24
I know some of you have received the same email. However it may be new to others, so copying his email below:
You’re absolutely right that a shareholder update is due and my intention was to provide one by the end of April and I hope to be able to soon.
We were on track, if you could call it that, as it seems that we get thrown off track more often than not, and then last week happened... All progress made was delayed at best and we had to place everything on hold. It made a challenging situation, difficult. That said, the debt holders are some of our strongest backers and they are just as interested as we are in seeing this company turn around. We have already taken steps to reduce cost, divest assets and shut in where unprofitable.
As you may know, I joined Shell right out of law school in 1997 and went through the 1998 bust, but negative oil prices were something discussed only in academic circles. The complete lack of demand
and the financial fabrication of futures with excess supply from the Saudis and Russians created a perfect storm. That said, I didn’t think it would get to $-40! It’s likely to get there again in May for June futures. Question is, what happens when world storage is full? More importantly to me, what happens after well after well is shut in? Shale wells will shut in first, then onshore conventional oil wells and then offshore wells. The largest integrated companies will fare well in my opinion and pick up good acreage on the cheap. Small to medium companies will not survive. If companies file for bankruptcy, the wells go to the banks, then to auction, etc. The restart won’t occur for 6 months or a year or longer as nobody has cash and banks won’t lend. The US government won’t back a loan either if the owners filed for bankruptcy. This should lead to a spike in oil and gas prices in the future. Question is timing.
I won’t go on and on. Luckily, if we can call it that, we started the process of selling the assets or shutting them in and we discussed this in an RNS a month or so ago. Our goal has been for over a year and a half to put our historical assets on pump and monetize them while seeking better opportunities. While the monetization is challenging, the opportunities seem to be better than ever. We hope to be in a position to take advantage of our listing, our existing structure and some cash in the bank to be able to evaluate mergers and / or acquisitions.
While the landscape is very different than it was a month ago, good properties are good properties. If you don’t have to figure an acquisition cost in the metric, then the chances are exponentially greater that you’ll to be profitable in the long run.
I’ve had a couple of shareholders ask the same question as you and will send them pretty much the same email as this one to ensure consistency.
I hope to have an RNS out soon with more concrete detail.
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