Member Info for SouthSeaBreeze

As mentioned by others hedging through derivatives may be a rather better bet and possibly less expensive

Goldbadger1’s idea is substantially the same as one that I put forward somewhat earlier. In theory it results in a maximum saving at today’s share price of $172million, assuming the Bondholders opt for cash which they will do if the share price is less than $.52 in 2022. Of course it would take some time to buy the required number of number of shares and equally it would take a similarly long time to sell them come 2022 - presumably well prior to the final conversion date, so to speak - if the Bondholders could then be foreseeably certain to opt for cash at par, instead of the shares themselves. The documentation is a little vague but this must essentially be the only real meaning of the offering document.
So can the Company buy its own shares? No is the answer... The general rule under Company Law is that it cannot unless ... – It is empowered to do so under its Articles of Association, and it complies with the current legislation under the Companies Acts, and the Stock Exchange.
From memory, this would require an Extraordinary General Meeting of the Company, and a Special Resolution of its Shareholders to empower and define the programme of share buying for the specific purpose of settling its debt to the Bondholders.
Unusual certainly, but not illegal and with a possible saving of up to $172 million dollars within its purview, perhaps something the Directors should and do have a duty to consider, having regard to their fiduciary duties in that office. The Company would need to consider its possiblity in practice, what would realistically the saving be, and how the shares would be bought and sold. Certainly, not illegal under Company regulations although Stock Exchange Rules may add another dimension.
Obviously market operations of this kind will affect the share price, and temporarily reduce the share capital of the Company so it is tricky but certainly not impossible. With sums of this kind at stake, would the Directors be prepared to sacrifice a little of their dignity to save the Company and its Shareholders a potentially colossal sum of money?

Erratum: Bond redeemable 24th July 2022 at par $230m or convertible into shares at $.52 per share between now and then. At foreseeable share price redemption will take place at par without prior conversion. But the company could buy shares at a fifth of the price now if it could predict a price higher than .52 in 2022. The cost would be 5 times less to the Company or the equivalent $48000000 as against $230m, all subject to shareholder approval. Of course the share price could go lower but equally it could go higher, and the company could sell the shares at a profit before July 24 2022 and so hedge the cost of redemption at par then. A win win for them either way at a fraction of the cost.

Having gone back to the Capital Markets Day presentation. The operating cost per barrel at the rate of 18000bpd average is 17 dollars. The breakeven rate per barrel including all expenses of the business and the bond interest is 26 dollars. At the year end , assuming 30 dollars pbd price average, the comany will have 90 million pounds free cash. If the average rate pbd falls to 20 dollars, then that number is reduced by 45 million dollars free cash, leaving 45 million dollars free cash. These figures assume a pound dollar exchange rate of 1.30 dollars to the pound. It should be noted that today the pound buys 1.25 dollars so at today at least, the proportionate figures would be reduced. The Bond is repayable for cash at par in 2ü21 or for shares. No indiacation if the company has set aside a sinking fund for its redemption or not. These are the discrete numbers I have garnered from the presentation. They impact all company activities, such as well commitments at Lancaster and GWA, the plugging of Lincoln Crestal or its tie-in to the FPSO and the possible use of the idle rig currently at GWA. These all are still under discussion with Spirit. Over and out.

I am new to this board. I watched the telecon yesterday. Most of it seemed already in the public domain except for Lincoln Crestal which seems to waiver uncertainly between being plugged and tied back to the FPSO. Clear as mud. And the water-cut which seems to be stumping even Dr. Trice who once seemed unchallengeable in his analyses. The other oddity was from the last of the trio of presenters, a new face by the name of Chaffe or something similar. When talking sheepishly about oil prices, I remember hearing him say that if oil prices were at $20 a day, then the cash position would be 43m pounds at the end of 2020 compared to the very handsome 153 mill. now. My jaw dropped given that this fall will occur after at least one quarter has passed with prices between 50\60 dollars pbd. It struck me as quite obvious ' back-covering '.

Did no-one else notice this as it really amounts to CAVEAT EMPTOR in capital letters, even if inserted right at the end from the new boy.

Any comments? Great investment when it comes right but avowedly considerably less good at 20 dollars pbd, isn't it? Or am I missing the point?