I wont comment on whether acquiring the full 90% is a good or bad things for existing shareholders... I just dont know. Alot of new shares involved.
As far as the purchase price, it seems MHL are paying a bit more for the 90% stake than RRS for 10% stake.
But from fundamental outlook $59mil, whilst not cheap, it does seem fair and offers both the buyer and seller good opportunity.
$59mil buys you the lease, 700bopd and the rigs. So the drilling of future wells shouldnt cost too much.
Even at 700bopd and assuming 330days of production with a $40 return, that equates to $9mil/year
Now they want to up output to 3000-3500bopd, lets assume they fail. Conservatively they achieve 1400bopd in the very short term. Thats $18mil/year profit for a $59mil investment.
Im sure IF they want the full 90% they can sell those numbers to NEW investors and existing.
The risk profile and revenue curve of the company will change from explorer to producer.
Im sure they could even include a convertible note or debt into the funding equation backed by $9mil earnings.
MHL Price at posting:
0.4¢ Sentiment: Hold Disclosure: Held
