or lack thereof:
1. the preff to AB Global (and other parties), total 62.3m US$, has some "interesting" properties -
On 6 November 2017, as part of the financing for the Aneth assets acquisition, Elk Petroleum Inc. (EPI), a wholly owned
subsidiary of ELK Petroleum Limited, issued 25,000 Series A preferred stocks at US$1,000 per share and 40,000 Series B preferred stocks at US$1,000 per share. During the year, 5,000 Series B preferred stocks was syndicated by AB Global to other parties resulting in an increase in Series A preferred stocks to 30,000 and a decrease in Series B preferred stocks to 35,000.
note that each of these instruments has DIFFERENT TERMS AND RIGHTS .....
viz:
i. 5% of 8/8ths of the Company’s interest in Madden; and
ii. 5% of 8/8ths of the Company’s interest in Grieve
- Dividend of 15% p.a. paid quarterly (whereby 20% of dividend due can be paid in kind by issuing further Preferred
Stock)
- Redemption at option of the holder at the following term:
- If EPI IPO’s in US, Series A holder to receive redemption amount of Liquidation Payment Amount x 1.18 paid
(at Holder’s election) as either:
i. Cash, or
ii. Shares of Common Stock at 80% IPO Price.
- If Change of Control of Company occurs, holders of Series A has right to require redemption at 1.18 x
Liquidation Payment Amount
- Redemption at option of EPI at the following term:
- EPI has right to redeem Series A in cash at 1.2 x Liquidation Payment Amount
"B"
Fees:
i. 100% Madden net cash flow until Series B shares are re-paid
ii. After Series B has been re-paid, a Net Profit Overriding Royalty Interest (NPI) at Madden of 25% of Madden
net cash
iii. If Series B had been syndicated prior to 6 December 2017, the Madden net cash flow would have been
reduced to 25%
- Dividend of 15% p.a. paid quarterly (whereby 20% of dividend due can be paid in kind by issuing further
Preferred Equity Shares)
- Redemption at option of the holder at the following term:
- If EPI IPO’s in US, Series B holder to receive redemption amount of Liquidation Payment Amount x 1.18 paid
(at Holder’s election) as either:
i. Cash, or
ii. Shares of Common Stock at 80% IPO Price.
- If Change of Control of EPI occurs, holders of Series B has right to require redemption at 1.18 x Liquidation
Payment Amount
- Redemption at option of EPI at the following term:
- EPI has right to redeem Series A in cash at 1.2 x Liquidation Payment Amount
The preferred stock - debt includes transaction costs of US$4.8 million. The dividends for the purposes of the financial
statements are treated as an interest cost / financing costs on the basis the preferred stocks are classified as a debt
instrument.
this is the 1st time this apprears to have been disclosed !
note that the preff resulted in both int costs to ELK shareholders, and an "impairment loss" of 13.6m (below)
Madden 1P reserves decreased substantially during the year as a result of impact of gas prices and the present value of future cashflows were negatively impacted by the AB Global ORRI & NPI. This led to an impairment trigger resulting in the impairment of Madden by US$13.6 million to a nil carrying value. A future change in 1P reserves or renegotiation of the AB Global ORRI & NPI may result in a reversal of a portion or all of the Madden impairment.
note that the preff holder appears to have the ability to "switch" between Madden+grieve cashflows to Madden only c/flows (and did so during the period under review).
finally - note that to pay these punters out is going to take approx. A$102m !!!!!!!!!!!!!!!!!!!!!!!!!
also note that the "refinancing" has been delayed a second time (from sept to Oct-dec)......lolz .......
once they pay out the contingent consideration (US$10m) for the aneth acq ........their aint going to be much left in the tin......and note that the payables increased a "smidge" ........
imho - this thing aint an investable story until they get rid of the odious structure .........
rgds
V_H
