HOG - Hawkley Oil and Gas

Actually, Condog, the optimum word in the transcript is "big" - they won't need to do a "big" capital raising - he didn't say there wouldn't be a small one. Maybe I'm splitting hairs, but I'm prepared to give them the benefit of the doubt in the meantime - I've been waiting long enough, a bit longer won't matter.

They didn't need to raise capital i would have thought.

If the first well is running as forecast they could just go about business... bigger players may have moved in to realize the potential with the low operating costs and gas prices.

Either way we will find out tommorow in my optioion, i got a feeling they either listing on another stock exchange or signed a deal with Shell, but i could be completely wrong.

More than likely a share offer, but I would have been tempted to list in Europe given the lack of support locally, one of those things with culture holding the share price back.

Trading is now suspended here. Does anyone know what is going on?

Probably still getting the paperwork together today.

I hope they can drill wells better than they can spell. The spelling was appalling, someone must have been on the drink.

Magic Man said:

Trading is now suspended here. Does anyone know what is going on?

Click to expand...

If you read the notice:
"...The details of the capital raising are still being finalised. On this basis Hawkley Oil & Gas Limited requests that it's securities be voluntarity (???) suspended until the announcement is released, which is expected to be made prior to the opening of trading on Thursday 21 April, 2011..."

Bloody pigs they are.

If they're drunk as hinted at by their spelling it better be from champagne over happier news.

Management have been very careful to date and we will soon find out the details which may well be very positive for us all. I'd say we will get a bite at the cherry as well, otherwise the raising details would have been announced today. Extra money in their coffers will mean they can either accelerate drilling or be in a position to make a quick acquisition.
My only concern is that they did not wait until after the increased choke setting as they could have done the raising at a higher rate if all goes well there. At the end of the day it will be a good thing to move this little HOG to big HOG in the shortest possible time frame.

I'm sure it will be more positive for those inst'al investors who will probably get the biggest bite of the $15 million cherry at a good discount.

$15 million raised through the sophisticated investors placed by Hartleys at $0.37/share. Guess that explains why Hartleys was so bullish about the stock a month or so back.

Another $3 million to be raised through a priority offer from existing shareholders at the same price.

HOG down 6% after resuming trade to $0.39/share.

so anyone who holds hog will get to buy an extra 10K worth of shares at 37c?

tradefill said:

so anyone who holds hog will get to buy an extra 10K worth of shares at 37c?

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subject to shareholder approval at the EGM 27 May 11 and up to max. of $3 million

Really hope there is a very good explanation of why the extra shares were issued particularly after the earlier statements that there was sufficient cash flow to adequately fund the projects. I don't know why but I always get the feeling that many of these additional capital raising are for the benefitt of spohisticated shareholders, institiutions and the the mangement rather than current shareholders. Hope I'm wrong in this case.

It's certainly had an immediate depressing effect on SP

I haven't posted much about HOG on this board recently (I've been taking a break from posting for a while). Anyway, I think this raising is actually a positive development for HOG, using the figures I used on my blog:

Hypothetical Company #1 (No capital raising)
Equity - 10 million
Return on equity - 50%
60 million shares
Price per share - 1 dollar
Profit per year 5 million
Profit per share = 3 cents

Hypothetical Company #2 (Post capital raising)
Equity - 20 million
Return on equity - 40% (Take note it's lower)
70 million shares
Price per share - 1 dollar
Profit per year 8 million
Profit per share = 5.6 cents

Given that HOG has announced that the 18 million being raised is going to be used to drill a second well at Sorochynska, drill and appraise the first well at Chernetska, build a gas plant to process the Sorochynska gas (presumably increasing the returns from the wells in the area if we own the downstream processing), drill the third well at Sorochynska (simultaniously with the second one I assume), and "one or more acquisitions" (either acerage, or producing assets, either seems good).

Currently we have the situation as in hypothetical company #1, we have a very small equity component in the company which has been priced MUCH higher by the market, thanks to the massive returns we are getting from well #201. Although it's obvious the higher price we raise capital at etc the better, raising capital is actually the right move, if the equity can be deployed to generate large returns.

After this raising the company will be drilling wells 2 and 3 at the same time on the Sorochynska tenements, so if one fails and one succeeds it won't be as bad as going at it one at a time (due to the nature of the geological formations in Sorochynska, it takes around 9 months to drill with a soviet style drill rig, so to do it one at a time would leave us around 2013).

Right now HOG only has one producing well (extremely profitable as it is), so we pretty much NEED to get another one online to derisk the company and to show that the results from this well just isn't a massive fluke. Imagine if the entire area yields similar results (even flow rates of 50% of the #201 well would be massive).

Anyway in summary: If both wells hit gas, then this raising is brilliant (although I would've waited until the production figures were confirmed over a quarter, and the price rise to 50+ cents, before raising capital, but hey I'm not CEO). If one well hits gas, then it's still a very nice risk mitigating move, as we've drilled both at once (imagine if we drilled only one via cashflow, and it was a duster... the price would be WELL below the 37 cents that we raised at today, as the markets would assume #201 is a fluke). If both wells are dusters, then we still have decent cashflow from #201, but obviously the company isn't as attractive, so at least we'll be finding out if HOG is a goer within the next 12 months, instead of the next 24-36. For once, I support a capital raising.

PVF.

Interested to here Condogs thoughts? is anyone picking up HOG at the moment?

PVF great thoughts and thanks for the post. I posted on another forum regarding HOG and my thoughts.

Capital raisings through institutions and sophisticated investors is a necessary evil for small cap explorers and producers, its just a simple fact of the ASX. Its unfortunate for those of us who are retail investors, especially when we get stooged with only having $3mill to spread across all current holders so its likely scaling will occur.

Anyway, I still believe the raising is a positive as does PVF and for basically the same reasons. The additional funds gives us the keys to a number of doors, instead of only obtaining 1 key at a time using cashflows to fund developments.

The doors that we now have the keys to and have been signalled by the company include:
- Well #1 at Chernetska (Already underway and was next on the list anyway)
- Well #2 at Sorochynska (Was aimed for spudding June/July, could be brought forward now?)
- Well #3 at Sorochynska (Wasn't even on the radar until today's announcement, could be brought forward to now also?)
- Gas Plant (Not on radar either, would be interested on advantages this brings - hopefully company provides some commentary)
- Acquisitions (Wasn't on the radar either, lets hope some smart ones are made)

So essential we've gone from having 2 doors we knew were on the way to being opened, to now 5 doors which can all be unlocked now and start to open them.

I won't continue to re-hash what PVF has said, but in basic terms if the new wells are even moderately successful, earnings will expand and the share price should expand as well. A little pain now could set up a lot of gain for 12 months time. As it stands currently i'll be taking up some of the SPP.

Oh, and don't forget some resource expansion at Sorochynska which should be out relatively soon, and it wouldn't surprise me if the company already has some indication of a reasonable upgrade that they will use to boost the share price post SPP.

GL 2 all, DYOR.

It's all a bit interesting. My memory of earlier comments from HOG was that they wanted to take things carefully and build up good organisational structures. In effect not over extend themeselves financially, administratively or technically. And becasue they were cash flow postitive with a decent surplus this seemed quite reasonable.

Now we have the prospect of multiple projects which on paper look good in terms of quicker returns but perhaps go against the original ideas? And I'm not that sure that all these projects are fundable with $18m. Perhaps they just get start earlier and cash flow from the first well helps pay them off quicker.

I agree that a reserves upgarde would be an excellent bonus. It would also be interesting to see exactly what sort of new acquistion was being planned and the potential for that. In any case I want to see it hit $1 before the end of the year!!

Like many posters, I'm surprised that the raising did not occur until after the updated flow results were released to the market. The cynic in me suspects that the flow results might not be as good as first thought and so the cap raising is got away now before the SP drops on release of the updated flow results.

Happy to see a 3rd well on its way.

Not swo happy to see raising done at 37c, when a month ago it could have been done at 44c.

Happy to see SPP as part of it. This is why i always hold shares in each account i have, gives you mulltiple bites at the cherry.

Lets hope they can get these wells happening asap

The deal is more or less done and dusted now with the 15% placement.

The retail placement and the remainder of the investment placement is only around 25% of the deal which is pending the shareholder meeting in a month and may just be a wild card or get out of jail card if needed.

If you want to buy you may as well at 38.5 cents, not much difference to 37 cents.

I think the bottom has been reached and only one way up. At the end of the day emotion can get in the way of common sense, the stock has been massively de risked from this.

The gas processing plant was always part of the equation i believe it is in one of the reports.

When your paying something like 11% of your revenue to use the existing infrastructure at a cost of 2 million you may as well build your own, read into that about the forecast revenue.