sammie, yes I saw those monsters that SandRidge brought in, that's pretty amazing. Have you ever seen a play where there was such a high deviation between the best well in the play and the average well in it? In Logan County so far we have only 2 data points, Osage's well and Devon's, so I admit the jury is still out. Something seems to have gotten Devon interested though, given that they spudded 2 more wells down there recently.
I don't understand your comment that SD is losing money on its gas. What does "pinon cost" mean? When a well produces both types of hydrocarbons, how can you point to one of those hydrocarbons and determine how much the netback is on that one? I've thought about this a bit and came up empty.
Could you tell me how you arrived at your 40% figure regarding the warrants issued in connection with the Apollo facility? I get more like 7.5% per year, figured as follows:
- 1.5M penny warrants issued @ 4/27/12, closing price the day before was $1.54, a week before that (i.e. the latest date they probably shook hands) the stock closed at $1.10, the warrants are exercisable into restricted stock so a discount should be warranted, but lets just keep the math simple and value those warrants at $2.25M (i.e. 1.5M x $1.50).
- Facility goes for 3 yrs.
- Value of warrants ($2.25M) divided by 3, or $750K, represents the annual cost of the equity kicker.
- $750K divided by the $10M max amount of the facility = 7.5%
The above equity kicker together with the high amount of cash interest is still a very high interest rate, but not anywhere close to 40%. What am I missing here boss? |
