Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
It might well be just Lombard buying back in at a lower share price
This time is going to be tough for the company. Whilst energy is doing well, there are some surrounding issues. This is not a stock to invest in for the long haul until it is clear a path for sustained money generation exists.
The UK expenses for this business are neglible. The website is no longer maintained, the business address is one for remote businesses. Martin likely works from home if not from Argentina - as we understand this to be his only job but cannot say.
The cost in Argentina are harder to guage as it encompasses work overs and labor costs. Unfortunately there is no significant transparency on the costs in Argentina. The shut in of wells etc likely has more to do with strike action over pay in the area.
Potentially agreeing to pay workers in dollars might starve off these costs. It is unlikely the company will post a profit in light of the windfall tax that wouldv wipe out any profits. We do not invest in the North Sea so cannot do it by other means.
Shutting in gas wells might be for the best given oil provides 3/4x the profits. Gas is now reapproaching the loss making area. I think as long as oil production is growing to stable levels and long term contracts at todays elevated oil prices can be secured that will give the company some breathing room.
It is unfortunate, many, myself included have lost significantly on the false promises from the directorship of this business and from credit to share swaps. There were plenty of much safer investments that have given better returns including just holding cash in dollars.
I would not advise on further investment in this businesses stock, we need to see real results in action to justify investment of fresh cash. It is producing so there is some hope but we need to move to oil from gas and then to renewables taking advantage of the weather conditions. The transition to solar attempted last year was poorly timed as it ignored work over obligations. If introduced later in the year it would have been better received.
A move up would depend on our luck. If they ever started to do actual mining we would see returns. EVs will continue to dominate for the future and China will do a lot of EV manufacturing. Going to Singapore might be a move to get big backers. If we ever get these rocks out of the ground us and the board will be rich people.
I might be facing a rather unusual situation compared to my colleagues on here. I tried to top up my shares as I noticed another share I had Boil- was up so I sold off the shares to add to this position only to fine I own too many so am unable to buy more.
As for stock recommendations Ranger might wish to avoid a legal trap of advising. Generally small caps and microchips are risking.
If you can find one well managed, low to no debt, focused on long term development, which is not debt fueled and cares about share holders like CPE was your on to a winner. You want a boring company, maybe one with dividends that you can put money on every week knowing by years end you beat inflation.
Summary of company advise:
1. Continue re evaluation of opened Wells.
2. Announce and begin process for next round of well reopenings to finish February
3. Use excess profits to pay down exchange credits.
4. Hold off on announcing plans for renewable energy until at an advanced stage of research and credit balance reduced to below 5million.
5. BySept 2023 with significant reduction in debt, high revenue, few Wells remaining to reopen announce entry to renewable energy markets including Chile and Southeast Asia
6. By 2024 be generating revenue from renewable energy.
7. Begin the process of selling off oil and gas production fields to invest in renewable energy production fields.
8. Get renewable energy revenue over 5 million revenue a year and aggressively expand renewable energy holdings turning black gold into green gold.
9. Exit inflationary environments like Latin America for low cost low tax Asian ones.
A returning investor,
I've not been on the chat for a while as working overseas meant I could not be active.
1. Ranger was right
To be honest, I see where Ranger is coming from. When I first invested in Echo it was a small sum and saw a good return. Then as the company share volume increased I saw that reverse. Whilst other company's in the energy sector in the same time frame bounced back 50% or more this share fell 80%. Knowing why makes the pill no less bitter in throwing good money after bad.
It was a surprise when the share conversion took place but the share price remained fixed. I actually wish I'd taken Rangers earlier advice and never touched the company, played it a bit safer and right now I'd be better off.
If I had done that I might well have invested less now, had the same amount of shares and seen good returns. I don't know if we are out of the woods of troubles yet, but for now it seems we have some years ahead of heighten energy bills and better returns.
I think Martin has stuck to the plan I put forward earlier in this year on the forum and it has seen the company's fortune change for the better. The share price no, but the company is healthier. Now we need to really get debt free entirely without further share liquidation in the short term.
I suspect despite better prices this year the Wells being turned off means another year of 18million revenue and breakeven expenses.
The silverling is if the wells are determined to have long term viability of 5-10 years and more reserves then that may finally lift the share price rapidly. As it gives a long term picture for revenue generation.
Hybrid energy next steps
As for next steps, after our credit debt is under 5million and we boost Well production another 20% I think we can then start thinking about solar fields in Chile and Wind farms or renewableenergy in Southeast Asia.
The company might want to invest in projects in Southeast Asia i.e. Vietnam or Thailand to supply growing manufacturing factories there and take advantage of tax subsidies on renewable energy company's. The inflation in the region is much lower then Argentina, and the political situation less turbulent, and energy can be sold to both China and India along transport lines due to finish 2026. Also labor costs much less allowing our revenue to go further.
I can see that as the path to long term growth. Maximise revenue generation from legacy energy, generate enough to buy into renewable energy that has been completed or close to so we can have instant revenue coming in. Then keep investing profits into building a revenue generating renewable network. I think big company's have the time to invest start to finish but we need money coming in to fund long term investments not just debt rounds. So it's better we buy finished or part own near finished projects.
In the long run it is better by 2030 we are a renewable energy focused company like Ovo but we need to make the most of the
There's a famous speech from Peter Lynch about Dunkin Donuts share price.
When he first bought it, it had drop 25% to $4. He said this a great buy, revenue is up, they are expanding,profits are up. He told his mum to invest and they both did.
12 months later the stock was $2, then $1 but revenue, profit and expansion were growing. Peter Lynch got a call from his bosses, all he could say is it makes no sense.
4 years later the share sold for $40. Mr Market is not a good barometer of performance, the balance sheet is. We have seen everything from Rivian go to the moon on zero product. If SP meant performance the market would be rational. The headwinds are there, if they continue to be all well and good.
Ranger was right about the SP but also in 2 years production was down, prices were down. They say selling something oversold is a risky endeavour. Now the stock can certainly go down to 0.05 with a market cap of 1mill whether this reflects the actual business performance is impossible to say.
I remember hurricane energy at 0.5 valued 14mill with 120mill cash and debt 100mill. It took the court and a major shareholder replacing the board to reveal they had tried to pull the rug on investor's when the company could pay off its debts. 15 months on its valued at 168million, paid off its debts and in line for 140million free cash flow every year.
SP means very little asMr Market is very irrational. Look at 2019, 2020, 2021 and present production levels. In 2019 production, revenue, was lower then today, debt was the same but SP was 3p.
Energy is much more today, production is up, plans have been implemented to turn on Wells twice. Yet SP 0.25-0.27 Ranger are you still wait for an 0.2 bargain price?
Ranger I think made a prediction that at some point shares will be 0.19 at that price this company to buy is worth 2-3 million.
With a revenue of 11-20 million for 2022-2023 as for debt with production if it hit 40-50% then the following year potentially 30 million revenue and debt repaid by 2025 or a favourable restructure.
If a war continues for the next few years energy will remain elevated. Regardless of the metrics we have seen worst businesses out there. I guess its hard to know what will move this share significantly.
Will it be 50% production increase, will it be debt repayments or a board reshuffle and news. I would say so far BoD has done almost all the things that usually move share prices the one he's not done is made significant in roads into debt levels.
Assuming in 6 months production is up, that's the time to focus on halving debt levels.
Hope it's in 12 months, that would be nice
I would say it is good they are giving an update and I hope they continue to. The reason for the drop is likely a lack of trust in the company to deliver on promises. So regular updates and genuine improvements will go a long way in improving that image.
If revenues are significant and significantly above expenses then that's good. If the BoD can make good on their word the stock will rise, especially if revenue is up and debt is down.
Ideally we want to be debt free or have a lower debt by the time of the recession. The aim is good to produce our way out of debt if achieved we will be on a good path.
As long as the news remains positive declines in SP are a buying opportunity as how many businesses are going down on bad news, investing in good news at a lower price is an opportunity. I did just that with hurricane energy, XRP and CPE netting 10x to 5x in a year or so.
I am not saying Echo is a 10 bagger, or 1 bagger, or will be a dividend energy stock. Nor that we should ease up on monitoring the board to deliver, they can have a breather when the promise is delivered on.
If we reach a penny, I'll not be posting on this board. I am annoyed I'm saving or I would capitalise on this market movement but that's just how it is. I have a strategy and I'll be sticking to it this time.
How does a company in a situation where gas and oil near doubled in 2021 manage to match revenue of 11 million and only lower debt 1 million
Do you ever read the interpol and think it would be better to invest in them since they are a model company for communicating with stakeholders?
What CEO can do is likely limited which is why he's called everyone. Sounds like trying to give a personal touch the trouble is the company could be doing very well but how do we know. We all got the blanket email likely because we all complained. Where was the call earlier in the year? Or acknowledgment? Why when a jobs on the line.
Like at hurricane energy they shuffled the board and it Rose 10x paid off all debt in a year when former board tried to say they would go bankrupt.
Why are we so cash strapped, why does our CEO need a high salary when inflation is eating into his workers pay pack. If he took a 50% pay cut or 80% and took out some shares as compensation we would know that capitals going in the business. These high buy actions look to me like someone wants a big stake for a shareholder revolt.
Argentina inflation means little, we are paid in usd for oil and gas. We should have an exchange rate premium on the £00 of 20%. We should also have wide profit margins being heavily invested in scalability.
On the 27 June 2022 what we need is to know there's a road map that's being stuck to. If we say it's okay got 10% production boost nothing will happen. Production was down 25% from 2019 so we are trying to come back on line at a lower cost of production.
I've said before the firm has media consultants. Why not pay a uni kid 25k to run the website and send out the odd email or talk. Then we would have info to go with.
I got a similar request to speak to MH. I requested a reply in writing and that he give a presentation. I have offered before to give regular updates on the company for free on the website if allowed to. This news silence is deafening.
No official figures, no news on debt, some news on production, no news on our clear increase in oil production. Not sure what will be said at the AGM.
If production in 2020 was 1966 a day on average producting 11.1 million in revenue
Production in 2021 was 1491 a day with prices increased by 126% this should mean revenue is (11.1x2.26) = 25, then take off the fall in production which is about 25% so revenue should be 19million in 2021.
Assuming the new price increase of 65% even from a Conservative estimate revenue for 2022-2023 would be 19x1.65 = 28mill. Yet we are told the contract only brings in 7mill in revenue which is odd if its meant to be based on past contracts essentially where is the other 10million in revenue gone?
If we are waiting till September we should have the 9mill to end the unsecured debt allowing us to increase production to 2019 levels half way through the next quarter.
I just wish MH could make this clear as spinning production without revenue is a recipe for cooking books.
So, we really need to do the maths on the barrels of oil sold. In 2020 we had revenue of 11.1 million $ and barely were in loss.
In 2021 the contract we got was 126% better so if production was broadly the same our revenue for 2021 should be $25million
Assuming a further increase in 2021 to 2022 of 65% on those prices revenue for 2022 should equate to $40million with excess of 25% being sold at a further $20million for the year.
Production levels are down from 2020 and 2021 but now being ramped up. I am a bit baffled why results have been delayed given the trades are in usd and costs are being reduced. I would expect to see high revenue and us already clearing that 45million owed so I'm a tad baffled at the lack of information unless the plan is to buy bonds on the cheap allowing them to clear trade debt cheap.
Yet why stay 9million or so in debt to unsecured creditors? Where's the money promised in the figures going. I have a long flight in so might well do the maths.
I can assume the plan is surprise us with all debt repaid September 2022 that would be nice.
I will likely be unable to attend the AGM as it falls on a workday. So in my absent can someone attending raise the following questions for me:
1. How much is PR paid as a company expense. We use them for consulting, it seems to me unjustified what they are paid as MH could give regular short updates on the website fortnightly and an informal update monthly (5-10 minutes) and not need the PR. There cost needs to be justified otherwise it is a wasted consultancy service.
2. A breakdown of our expenses, as greater efficiency could be found in some sectors.
3. Cost per barrel in May 2022, or average over March-May 2022 on the different oil fields, and a projection assuming inflation reaches 100% in argentina. We need to be able to see projections for a worse to best case scenario.
4. A realistic schedule for workovers in order of production. Right now, assuming we have a base contract (which is the same as the 2019 price despite gas being double then) that protected 85% of our then production. With the new uplift, 25% is being sold at market price so when can we expect the next workovers to complete and which will be completed?
5. Are we considering any energy acquisitions, solar was not a bad suggestion but I would rather we bought assets from distressed companies. Are we aware of any of those?
6. Are we taking steps to pay down our debts? If we can only work on one workover at a time and have sufficient capital coming in the fund then next as and when. I want to see the debt being paid down.
7. Switching the salary in large part to performance related. Every £ makes a difference in the viability of the company. If the CEO is taking £150,000 worth of shares, and £50,000 in salary whilst the rest goes to internal investment that is good.
8. Do not do share buy back until debt is significantly down. We get no benefit to the business in share buy backs. It is better than money goes towards improving the business.
9. Can the BoD buy into the company shares, it shows a lack of interest in the future of the company to have no shares and sit at the side lines. At least announce shares are being brought via a vehicle.
10. I would rather we posted near zero income with the debt getting systematic reduced, and the more spending on work overs. We need to make a viable business, and if we can reach that stage where debt levels take a dent and production increases then we have room for change.
Note, I, like many investors have been disappointed by the lack of regular, consistent and frequent news on the company. We need that to improve. The increase in production of 10% is a welcome step as it brings with it another 1million+ in revenue. We need to know more of these are being followed up on and if multiple workovers will be done at the same time.
If they are, I would be happy with MH taking a pay rise, pension rise, share rise but we need to see the consistent results to justify it.
I still remember CPE from April 2020 all the way to November 2020 it was selling below $6 then it December it came out they had production up and were able to make a profit. Same should have happened here, if not the management are swindlers and a case needs to be taken out because every oil and gas company has been in profit this last year would be highly implausible not to be.
We just need to get the price up to 50mill for institutes to pick it up really.
I said it before, we won't hear anything in general until christmas. Whether there is accumilation going on in the background or not. It's pretty uneventful at the moment, the more the price falls relative to production and oil really I want to see the balance sheet unless we headed oil prices it has to be reasonably high. If we were not selling to Argentinians or US the oil and gas should had shipped to China as there prices are off the wall. No guarentees the management was good enough to do that, but to be fair I think this is safer than Tesla but much is safer then Tesla on this market to invest in.
Not sure if anything saw Boris promise to do a Biden and inflate sterling with his 1 trillion loaned infrastructure plan. If he does it all this money made in Argentina will be worth a heck of a lot more when converted into sterling.
As for the price falling, I am reminded of so many penny stocks like Portland Gold which traded at like 0.1p for years then last year shot up to 39p. Echo used to be worth a ton, if governments are in an inflationary movement which they all seem to be then echo with its oil & gas.
If howerver oil and gas go too high in price then we should drop this stock because no one will buy oil. We do not want the issue of the late 1970s where oil stop up hugely.