If You Lot Don't Convey Plenty Cash You Lot Can't Stimulate Problems Amongst Your Tool As Well As You Lot Mightiness Lose All Your Properties
Houston American is an oil-and-gas explorer which had plenty cash for i speculative good inwards Columbia. Just i speculative well.
It had to work.
Alas recently their (down-hole) tool failed in addition to their stock dropped 35 percent. The stock has since drooped a petty more. But it was - as the CEO pointed out - a promising well. They had merely about 200 feet of "net resistive sands" which my readers helpfully indicate out way sandstone amongst depression electrical electrical conductivity in addition to thus maybe saturated amongst hydrocarbons.
But they did non larn to exam those sands (yet) in addition to tool failure meant they could non exam the good at its target depth (and they had to plug the lower business office of the well).
The interrogation arises though - why didn't they develop the well? Why didn't they create what "big oil" does when it has problems (that is throw coin at them). The response is that they create non convey much cash.
The 10K merely came out. The showtime matter I looked at was cash balances. Unescrowed cash was 9.9 1000000 compared to 26.6 1000000 a yr ago. At the goal of September cash was 15.1 million. Most of the good expense has in all likelihood been incurred after yr end and the cash residue is almost sure depression unmarried digit million.
Which is non what you lot desire when your tool breaks in addition to it is going to terms a lot of coin to develop it. Or fifty-fifty a fair whack of coin to exam the "net resistive sands".
Still the fellowship is at i time almost it. The auditor did non reach them a "going job concern statement" which surprised me. But the fellowship disclosed the problems anyway. Here is the disclosure from the 10K.
It had to work.
Alas recently their (down-hole) tool failed in addition to their stock dropped 35 percent. The stock has since drooped a petty more. But it was - as the CEO pointed out - a promising well. They had merely about 200 feet of "net resistive sands" which my readers helpfully indicate out way sandstone amongst depression electrical electrical conductivity in addition to thus maybe saturated amongst hydrocarbons.
But they did non larn to exam those sands (yet) in addition to tool failure meant they could non exam the good at its target depth (and they had to plug the lower business office of the well).
The interrogation arises though - why didn't they develop the well? Why didn't they create what "big oil" does when it has problems (that is throw coin at them). The response is that they create non convey much cash.
The 10K merely came out. The showtime matter I looked at was cash balances. Unescrowed cash was 9.9 1000000 compared to 26.6 1000000 a yr ago. At the goal of September cash was 15.1 million. Most of the good expense has in all likelihood been incurred after yr end and the cash residue is almost sure depression unmarried digit million.
Which is non what you lot desire when your tool breaks in addition to it is going to terms a lot of coin to develop it. Or fifty-fifty a fair whack of coin to exam the "net resistive sands".
Still the fellowship is at i time almost it. The auditor did non reach them a "going job concern statement" which surprised me. But the fellowship disclosed the problems anyway. Here is the disclosure from the 10K.
While our evolution costs were funded during 2011 amongst funds on mitt in addition to cash menstruation from our other producing properties, our funds on mitt at Dec 31, 2011 in addition to anticipated cash menstruation from operations inwards 2012 are non sufficient to fund our 2012 drilling budget. Accordingly, unless nosotros are able to secure additional financing or substantially increase our operating cash flow, nosotros may live on required to curtail our drilling plans. We create non shortly convey whatever commitments to render additional financing to back upward our 2012 drilling budget. If nosotros are unable to secure additional financing, nosotros may live on unable to encounter sure contractual commitments regarding the evolution of our properties and, equally a result, may incur penalties or lead chances losing some or all of our involvement inwards properties for which nosotros neglect to satisfy our funding commitments.
Bluntly if this fellowship does non heighten coin it will not live on able to encounter its drilling commitments and may lose all of their involvement inwards all their master copy properties.
Funny how they did non advert that when they talked almost their "net resistive sands".
Lesson: if your tool fails, your stock droops in addition to you lot convey no cash you lot tin lose all your properties. Even if you lot demo some resistance.
John
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