Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Currently up 7% in Canada...
LSE price is up. Google graph isn't always up to date.
Am expecting s gradual closing of gap to the placing price ahead of a potential RNS later this week.
On the wild assumption that placee's conducted due diligence , closing the gap with the placing price would seem a likely trend ahead of an anticipated RNS.
Souc's finances are summarised in the Eight Capital report appended to viable's post. The hedging issue is explicitly discussed at page 14. It is a short term issue and seems to me to be of limited relevance beyond this year. Indeed Eight Capital estimate that SOUC will be free cash flow positive by Q4 of this year. Net debt at end 2022 is predicted to be $1 million. All seems easily manageable given the recent doubling of production revenues.
.From the RNS announcing the placing
...."Following the encouraging test results of our ongoing operations at Gwinville, utilizing our improved Generation 3 completion design, we believe that this is an opportune moment to finance the business for further, operationally-driven growth through the Offering. In tandem, we continue to see significant opportunity for accretive acquisitions in our area of expertise and believe that this financing will allow us to continue to act nimbly and opportunistically as we execute our growth strategy. These are truly exciting times for Southern Energy and our shareholders."
.......
Note that they specifically mention using proceeds for 'operationally driven growth' and it seems probable that this will include new wells and possibly incremental improvements to infrastructure. An acquisition is not immediately required but will accelerate growth and increase reserves.
There is no obvious justification for the share price trading at a significant discount to the placing price and I can't imagine the board being happy with that. They will want to keep the institutional investors happy so I also anticipate one or more positive RNS's in the coming days and weeks.
I see. So basically they sold some new shares so they can buy them back with the proceeds of the sale to try and mitigate reducing shareholder value by 50%.
Sounds like a plan!
I did note that, however the word 'potential" is not to be overlooked either.
The RNS did promise much and yes you would assume places did due diligence. However few if any.of them will have expected a near 20% discount on placing price. Something doesn't feel right.
You do wonder if they have a plan. If others manage to announce acquisitions councident with a placing why couldn't SOUC? Did they think they had a deal only for it to go pear shaped? Time will tell, but if they dont have something in the bag and announce it soon I dread to think what might happen here.
Still no news and so the slide continues. 46p finish n Canada means its approaching 20% below the placing price. What a car crash this has become!
We very badly need some positive news to counter the generally bad market sentiment. That combined with what is looking like a bombscare of a placing is certainly taking a toll on the SP.
...and 11 million quids worth of new shares, valued at 55p hit the market next Tuesday. Wonder if that might impact the SP?
My buys this morning have gone through just below tbe buy-sell mid price and have been recorded as sells.
Have seen others note the same.
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From Stockhouse Forum.
"Gwinville Horizontals Cost $8.9 million US
So, about $3 million US per well.
We just raised $30 million US which should,if entirely used to drill more Gwinville Horizontals, be capable of drilling another 10 wells or so , excluding the added cash from ongoing increases in Production.
In. Addition we have 7,240,000 Performance Warrants which become exercisable as to onethird upon the Market Price equaling or exceeding CAD$1.20, an additional onethird upon the Market Price equaling or exceeding CAD$1.35 and a final one third upon the Market Price equaling or exceeding CAD$1.50.
That will raise another $10 million or so.
However, with all that cash it seems more likely that they will make one or two bolt on acquisitions that could boost production ( perhaps oil ) by 2000 barrels or so.
So there is a great incentive for management to run the share price upwards, so that those warrants get into the money".
There is also speculation that yesterday's drop in Canada might simply reflect shares from previous warrants being sold to finance participation in the new placing. Since there does not appear to be any reason relating to fundamentals, that at least seems plausible.
No obvious reason for the drop. Potentially some attempts to short ahead of the placement shares being admitted to trading. Price likely to be volatile until there is more certainty on forward plans re acquisitions.
Wouldn't mind those kind of warrants. 10% premium.on the placing price which was already 20% up on the share price.
Blows away the suggestion that a 20% discount was necessary to make a success of the SOUC placing.
Eco share price was 25p, placing price 30p with warrants at 33p. ECO has raised $12 million so a simillar order of magnitude to SOUC but they have added shareholder value. Their SP up over 5% this morning.
Have revisited some SOUC announcements and insights. The following video link being a helpful reminder.
https://youtu.be/2nax8Iru12w
I am coming to view the institutional share issue in a slightly more positive light.
-it should accelerate company growth during a period of historically high gas prices.
-The detail of the share raise prohibits the new holders from selling for four months which will prevent immediate profit taking and sets a timeline for the board to demonstrate shareholder value sufficient to offset the dilution.
Canacord have set a price target of double current levels following yesterday's announcements. We do need to see news of an acquisition and I would hope this will follow immediately after news on the placement.
A short term blip is inevitable but a sharp increase in SP before year end is not out of the question. Still disappointed that PI's were not given the opportunity to benefit from the discounted share price so the BoD owe us some good news to compensate. My sense/hope is they will deliver.
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@20:45
Existing P.I.'s will be hit hard by this dilution and discounting. It is a poor reward for our loyalty so I do hope your assessment comes good.
I trust the BoD are fully aware of their responsibility to private investors. A very rapid increase in SP will be required between now and year end if we are to find ourselves in a 'phenomenal position' to match that of the company and the new Institutional Investors heavily subsidised at our expense!). Let's hope the switched on board can offer some positive surprises to offset the ilikely mpacts of these actions.
A very unhappy P.I.
The dilution and the discount are significant. It's hard to see an immediate upside for private investors, though longer term growing the company cannot be bad.
I just hope they are buying a Shell or Exxon for £30 million as that might offset the short term impacts
Joking aside I hope I'm missing some hidden positives from this announcement
Not very happy about this level of dilution. A fairly contemptuous attitude towards existing shareholders takes more than the shine off the news of a doubling of production.