Lone
Re: Lone
Guys:
You do realize that the company will get money for this stock offering?????????????
The upstream oil & gas industry is extremely capital intensive. Access to capital is VERY IMPORTANT, especially for small-caps. Proceeds from this stock offering will clean up the balance sheet and fund their 2017 drilling program. Frank Bracken, Lonestar's CEO will be speaking at our luncheon on Wednesday in Dallas. He will provide details on their growth plan.
FORT WORTH, Texas, Dec. 8, 2016 /PRNewswire/ -- Lonestar Resources US Inc. (LONE) (including its subsidiaries, "Lonestar," "we," "us," "our" or the "Company") announced today the commencement of an underwritten public offering of 8,750,000 shares of Class A Voting Common Stock ("Common Stock"). The underwriters will be granted a 30-day option to purchase from the Company up to 1,312,500 additional shares of Common Stock. Shares of the Common Stock trade on the NASDAQ Global Select Market under the ticker symbol "LONE."
The Company intends to use the net proceeds from the offering, including any proceeds from any exercise of the underwriters' option to purchase additional shares of Common Stock, to repay Seaport Global Securities LLC, who has provided the Company gap financing in connection with the previously announced Facilitation Agreement, reduce amounts drawn under its revolving credit facility and redeem a portion of our outstanding Second Lien Notes. Any remaining proceeds will be used for general corporate purposes.
You do realize that the company will get money for this stock offering?????????????
The upstream oil & gas industry is extremely capital intensive. Access to capital is VERY IMPORTANT, especially for small-caps. Proceeds from this stock offering will clean up the balance sheet and fund their 2017 drilling program. Frank Bracken, Lonestar's CEO will be speaking at our luncheon on Wednesday in Dallas. He will provide details on their growth plan.
FORT WORTH, Texas, Dec. 8, 2016 /PRNewswire/ -- Lonestar Resources US Inc. (LONE) (including its subsidiaries, "Lonestar," "we," "us," "our" or the "Company") announced today the commencement of an underwritten public offering of 8,750,000 shares of Class A Voting Common Stock ("Common Stock"). The underwriters will be granted a 30-day option to purchase from the Company up to 1,312,500 additional shares of Common Stock. Shares of the Common Stock trade on the NASDAQ Global Select Market under the ticker symbol "LONE."
The Company intends to use the net proceeds from the offering, including any proceeds from any exercise of the underwriters' option to purchase additional shares of Common Stock, to repay Seaport Global Securities LLC, who has provided the Company gap financing in connection with the previously announced Facilitation Agreement, reduce amounts drawn under its revolving credit facility and redeem a portion of our outstanding Second Lien Notes. Any remaining proceeds will be used for general corporate purposes.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lone
Over the many years that I have been doing this, I have found dips caused by equity offerings to be good buying opportunities. First of all, the fund buying the shares has done extensive due diligence before buying, so we know it is a good price. Plus, the cash shores up the balance sheet.
Funding growth with equity vs debt is a good thing. Diamondback Energy (FANG) is a great example.
I will have more to say about Lonestar after our luncheon in Dallas on Wednesday.
Funding growth with equity vs debt is a good thing. Diamondback Energy (FANG) is a great example.
I will have more to say about Lonestar after our luncheon in Dallas on Wednesday.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lone
I cannot recall a time when a company did an equity offering and the existing stockholders greeted the news with a positive response. Think of all the small-caps that have been crushed by debt. Do you really want Lonestar to fund their 2017 growth plan with debt? I sure don't.
Yes, it would have been fantastic if they'd sold equity at the top, but shareholders would have bitched then as well.
Lonestar actually needs more outstanding stock because they must increase their trading volume before fund managers will be comfortable owning it.
Yes, it would have been fantastic if they'd sold equity at the top, but shareholders would have bitched then as well.
Lonestar actually needs more outstanding stock because they must increase their trading volume before fund managers will be comfortable owning it.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lone
Does anyone have information re the issue price for the share offering
Edit. Found the S-1A (4) on the company's website. It says pricing will occur on 12/19. Also, from page 50 (discussing capitalization), this excerpt re shares outstanding:
Common stock, $0.001 par value, 15,000,000(3) shares authorized, 8,022,015
shares issued and outstanding actual; and 100,000,000(4) shares authorized,
17,772,015 shares issued and outstanding as adjusted
I infer from this that this offering will more than double the shares outstanding. So one question is whether the company will be de-risked and better funded by its use of the offering's proceeds to the same degree (or more) by which current ownership is being diluted. Imo, it will take a lot of value enhancement to make up for this much dilution.
Dan, have you done any sort of updated valuation analysis proforma this offering?
Edit. Found the S-1A (4) on the company's website. It says pricing will occur on 12/19. Also, from page 50 (discussing capitalization), this excerpt re shares outstanding:
Common stock, $0.001 par value, 15,000,000(3) shares authorized, 8,022,015
shares issued and outstanding actual; and 100,000,000(4) shares authorized,
17,772,015 shares issued and outstanding as adjusted
I infer from this that this offering will more than double the shares outstanding. So one question is whether the company will be de-risked and better funded by its use of the offering's proceeds to the same degree (or more) by which current ownership is being diluted. Imo, it will take a lot of value enhancement to make up for this much dilution.
Dan, have you done any sort of updated valuation analysis proforma this offering?
Re: Lone
I will re-evaluate it after I see how much stock they sell and what the net proceeds are. It will lower interest expense and a stronger balance sheet deserves a higher multiple, so it won't reduce the valuation much.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lone
When you say it (the offering) "won't reduce valuation much," you must mean on a per share basis, since obviously the infusion of offering proceeds can only increase enterprise value. Right now, the market is not agreeing with you.
When the share count more than doubles, and proceeds are used partly to improve the balance sheet (certainly a good thing, and which merits a higher multiple because of reduced risk), the company's total value also would have to rise by more than 100% just for the share price to remain the same. That's asking a lot.
If you talk to Frank Bracken, you might ask him why they structured this deal in a way as to give the market so much time to hammer the share price before they price the offering. Look at a ten day chart. PPS has dropped from 9.50 to 6.22, and we still have 2 1/2 days to go before the deal prices. Sure, PPS will hopefully recover, some, after closing and analysts reset expectations, but in the meantime the deal's lower pricing is going to irreversibly result in some combination of reduced proceeds to the company and greater dilution to shareholders than would have been necessary had the period been shorter.
I'm not criticizing the fact of the offering and recognize the significant positive of debt reduction and increase in working capital at a time when they want to increase production. I would hope they, in hindsight, would acknowledge this should have been differently handled so as not to hurt shareholders quite so much.
When the share count more than doubles, and proceeds are used partly to improve the balance sheet (certainly a good thing, and which merits a higher multiple because of reduced risk), the company's total value also would have to rise by more than 100% just for the share price to remain the same. That's asking a lot.
If you talk to Frank Bracken, you might ask him why they structured this deal in a way as to give the market so much time to hammer the share price before they price the offering. Look at a ten day chart. PPS has dropped from 9.50 to 6.22, and we still have 2 1/2 days to go before the deal prices. Sure, PPS will hopefully recover, some, after closing and analysts reset expectations, but in the meantime the deal's lower pricing is going to irreversibly result in some combination of reduced proceeds to the company and greater dilution to shareholders than would have been necessary had the period been shorter.
I'm not criticizing the fact of the offering and recognize the significant positive of debt reduction and increase in working capital at a time when they want to increase production. I would hope they, in hindsight, would acknowledge this should have been differently handled so as not to hurt shareholders quite so much.
Re: Lone
I am reminded of one time EXXI sold shares to pay for one of its serial acquistions. JPM was the lead book runner and the shares were trading around $12.50 when the secondary was announced. Days later they were priced at $8.75. Soros and Wilbur Ross bought quite a bit. A few months later the shares were trading in the mid-to-high teens and those gentlemen exited. The next time EXXI issued shares JPM was not one of the underwriters.