Simple equation really, if 77H is not commercial the tails will be worthless. Good point Albright, 230 million
options out there, 210 million of them pretty well in the money as we speak. Convert at this price & that's
$31 million that has to be coughed up. Some small discount would have to be given I would say, particularly
if the result from 77H is just good but not great. Eg; Say it flows {24 hr rate} at 3mmscfgd & 200 bopd That
result, on back of envelope, would make the well profitable {don't forget decline rates also}, not
spectacularly so but not marginal either. I would expect an SP of 25-30c on that news. Let us not also
forget that it's only a 4 stage frac and lessons will be learnt from this well. Longer laterals and better
techniques + economies of scale will lead to better wells in the future.
Call the SP 25c. Then if I convert 100 000 oppies @15c my profit once sold would be $10K. If the
tails were say at a 10% discount, then I would give up 1K to make a quick trade and be done with
it. If however 77H proved to be a great result and the SP was say 50c, then my profit when I converted
at that price would be 35K, a 10% discount to that would be 3.5K. That's quite a big discount so I would
say that the tails will be much closer aligned to the heads if the SP reached v high levels. There is also
still a very small time decay on the tails {SEP 2015}.
To convert all those options eventually {Before Sep 15} would raise $30 million but would dilute the
registry by 35%.......... Don't forget though, we were offering Magna a 15% stake a year out from
where we are at now and that was for $6 million. A 35% stake at the time would have equated to
$14 million. So we would be paying twice what Magna were offered. Good for the company as this
has meant twice the cash for the same amount of equivalent dilution and good for oppie holders
as they have more than covered themselves for the extra dilution. They have in fact benefited
from the resulting dilution.
Can't help posting, trying to quell my nerves I think before next week.
GLTAH
OEX Price at posting:
18.0¢ Sentiment: Hold Disclosure: Held
