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  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    1. SAE typically burns off more work in the spring than they are able to replace, but in the other 3 quarters of the year they typically take on more work than they can otherwise complete. So, there is some seasonality to the backlog, but it should expand year over year as the business grows.

    2. There is a lump of business scheduled for winter 2015 in Alaska that they disclosed yesterday. They have two long term contracts worth $56mm and expect to add others in the near term for the same period. The $30mm of equipment has a long lead time for delivery and partially relates to the addition of a new team on the North Slope of Alaska for 2015. So I would not expect to see anything other than their typically high level of capital utilization.

    For additional questions I'd say to contact IR:
    Ryan Abney (rabney@saexploration.... - (832) 606-4117

    Hope that helps - and thanks as always for your thoughtful questions Clint.
    Jun 17 04:18 PM | Likes Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    I saw it on the Bloomberg announcement of the debt offering published June 16th at 17:09:05. That said, it looked low to me too so I double checked it with the company last night and got a reply this morning. It appears that a 6%-9% rate is more realistic in their view - so not sure why the indicated coupon is so low. Here is a quick recap of what I learned from the company and an update to the numbers. It’s still very good.
    The term loan has been amortized somewhat, so all in, with make-whole, its total payoff amount is $90mm. Also, the shareholder note is carried at fair market value on their books and adjusted closer to stated value every quarter (similar to a zero-interest bearing bond). That means they will have to pay it off at its full stated value, which is $17.5 million. So, here is the update:

    The leverage ratio stays the same as in our earlier analysis (3.8x) and interest coverage will be in the 4.0x-2.7x range (still well-covered). The interest today on $90mm of 13.5% debt and $17.5mm of 10% debt is $13.9mm. The new cash interest will be in the range of $9mm-$13.5mm (implied by 6%-9% coupon). So, the annual savings will be in the range of $4.9mm-$0.4mm, or $0.33-$0.03 pre-tax per share.

    $90mm repayment + $17.5mm repayment + 30mm capex = $137.5mm use of funds

    That leaves $150mm - $137.5 = $12.5mm for fees and general corporate purposes

    Pro-Forma Net Debt = ($150mm debt - 1Q14A cash of $13.4mm) = $136.6

    PF Net Debt / LTM EBITDA = $136.6mm/$35.9mm = 3.8x

    Interest coverage is $35.9mm / interest expense in the range of $9mm-$13.5mm => 4.0x – 2.7x coverage

    So, the refinancing will create pre-tax savings of $0.03-$0.33/share and will pay for $30mm of capex that company expects to earn back in profits in two years. And, because this growth is being debt financed there is no dilution.
    Jun 17 08:47 AM | 1 Like Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    Link to the 8K: http://1.usa.gov/UGTdgE
    Jun 16 10:23 PM | 1 Like Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    The company will repay its 13.5% $90mm term loan and a smaller $13mm loan. That will leave $150mm of 2.5% bonds as the company's sole debt. SAE will also spend $30mm for specialized seismic data acquisition equipment for use in connection with $56mm of contracted projects on Alaska's North Slope during the 2015 winter season. They expect a full return of capital on the Alaska investment in approximately two years (astonishingly good). They need $30mm now because the company must order the equipment in July to have it arrive on the North Slope before the 2015 winter season begins. In addition, the make-whole premium remaining on the $90mm loan amounts to only 3 months worth of interest - so, better to pay a small penalty today to assure delivery of equipment for a large contract next year. The equipment will allow for an additional SAE crew to work on the North Slope.
    Let's add it all up: $90mm + $13mm + 30mm = $133mm. That leaves $17mm or so for the make whole premium on the $90mm, financing and origination fees and general corporate purposes. So, a $90mm loan that cost $12mm/year to maintain at 13.5% is expected to become a $150mm loan that costs $3.75mm/year to maintain at only 2.5%, a savings of $8.4mm (8.4mm/14.9mm shares = 56c/share pre-tax!!). We knew this day would come, we just thought that it would be in 1Q2015.

    The company filed an 8K this evening that includes more detail than the press release and some financial information. With filing in hand, I calculated new Net Debt/LTM EBITDA would be ($150mm debt - $13.4mm cash at 1Q14A = $136.6mm net debt) divided by $35.9mm LTM EBITDA = 3.8x. That figure may actually be lower if SAE leaves some of the $17mm of residual cash (calculated in the paragraph above) on the balance sheet. EBITDA/Interest expense will be $35.9mm/$3.75mm = 9.6x. In other words, leverage is reasonable for a growing business and the annual interest expense is covered almost ten times over.
    So Christopher, I hope we can agree that long term 2.5% debt that's close to 10x covered (and may equate to 3.8-3.4x net debt/EBITDA) is something want for SAE so they can grow without issuing shares and diluting us. As an aside, the company also announced $74mm of new contract wins today.

    Jefferies is sole book-runner and the road-show will run through June 27th, with pricing thereafter. Credit spreads are back to their 2007 levels, so its reasonable to conclude that the bonds will price at or very near par. Kudos to SAEX for taking advantage of today's record low rates to responsibly refinance their high return on capital business.
    Jun 16 10:15 PM | 2 Likes Like |Link to Comment
  • Madalena Energy: Worth $2.60 - Small-Cap Canadian E&P With Large Argentine Assets For Sale [View article]
    The deal announced today is fairly accretive and puts the pro-forma company on something like 5x FCF before expansion capex by my back of envelope. People are upset about the stock portion of the consideration, but that’s an emotional reaction because the CEO has said he will not issue shares. However, because the deal itself is accretive, the share issuance is an artifact. That’s what doing an accretive deal means. The better question is – why are they buying a traditional asset in Argentina and a management team? I think the answer goes back to negotiating power to get their JV deal. Only by having the ability to walk from the negotiation table can they effectively obtain terms from a major oil company. The ability to operate and drill in country enhances that position.
    May 30 12:02 PM | Likes Like |Link to Comment
  • SAEX: Quashing The Bear Case [View instapost]
    The debt will be refinanced in 1Q15, the earliest date possible based on the covenants. The debt load is really not and issue at this stage - even according to the bears (see the full bull vs bear article put together by Chris DeMuth). Thanks for your question -
    Apr 7 12:07 PM | Likes Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    Christopher, thank you for your gracious acknowledgement and congratulations.
    Apr 4 05:19 PM | 2 Likes Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    The midpoint of '14 revenue guidance is for top line growth north of 70%, double the 36% rate of top line growth for 2013 when we back out pass through revenue. EBITDA guidance is unchanged at $45-$55mm. To me that EBITDA guidance looks like management (wisely) giving themselves runway to beat expectations. The 10k was filed today as well.
    Apr 4 09:50 AM | Likes Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    The restatements and today's price action are both pretty small in terms of dollar amounts - so not issue there. The conference call was uneventful with a reasonable Q&A session. Thanks for your thoughtful questions.
    Mar 19 03:45 PM | Likes Like |Link to Comment
  • Let's Talk About SAEX, Baby: Bull Vs. Bear Debate On SAExploration [View article]
    The press release out today shows the business is on track, executing and growing nicely. This is what the street needed to see - a "show me" quarter. Backlog is up and the EBITDA guidance is in line with expectations.

    Here is the release: http://bit.ly/1kIdjPj

    Christopher - I extend the olive branch - you are cordially invited to join the bull camp in good cheer and in good faith. What do you say?
    Mar 19 10:39 AM | 2 Likes Like |Link to Comment
  • SAExploration Holdings: Signs Continue To Turn Positive [View article]
    Well said!
    Feb 27 11:01 AM | Likes Like |Link to Comment
  • Madalena Energy: Worth $2.60 - Small-Cap Canadian E&P With Large Argentine Assets For Sale [View article]
    Madalena raised equity the other day and the dilution is now priced into the stock. They were pressed by their bankers to raise more, but took in only $20mm because they felt it was the minimum amount necessary to bolster their negotiating position in JV talks over Curamhuele. The secondary has been completely absorbed and the books are closed.

    RBC's JV negotiations on behalf of Madalena did not begin in earnest until November of last year - and so it was not until Madalena got to the table with the majors etc that they learned they needed more bargaining power (i.e. cash). So here we are in January, we got diluted 6%, the dilution priced into the stock yesterday, and now we wait for our catalysts.

    1. Upcoming news of Corion Amargo horizontal drilling
    2. Sale or JV of Curamhule by RBC worth potentially $1.05/share

    Note: the company has little or no day to day exposure to the Argentine Peso.
    Jan 23 12:45 PM | Likes Like |Link to Comment
  • Madalena Energy: Worth $2.60 - Small-Cap Canadian E&P With Large Argentine Assets For Sale [View article]
    Madelena struck oil and gas in Corion Amargo.

    The well is flowing 2,238 boe/d (80% oil) and with a 35% net working interest that would be 783 boe/d net to the company. Given that current production is about 189 boe/d in Argentina, this is very good news indeed.

    Before this result, overall company production stood at 1,793 boe/d (189 boe/d Argentina + 1,604 Canada). Now production goes to roughly 2,576 boe/d, up 43.7% on a combined basis. In January, the company expects results from another well nearby.

    Here is the press release:

    http://bit.ly/1btuQTX
    Dec 27 09:47 AM | Likes Like |Link to Comment
  • SAExploration: My Variant Point Of View [View article]
    Thanks for your question, I would gently encourage you to reach out to Mr. Abney directly. From memory of my last conversation with him the answers are yes across the board, but better to verify this yourself. His number appears at the bottom of the company press releases.
    Dec 24 08:19 AM | Likes Like |Link to Comment
  • Madalena Energy: Worth $2.60 - Small-Cap Canadian E&P With Large Argentine Assets For Sale [View article]
    A gentle request to all readers: Just before you decided comment or ask a question, kindly perform a close reading of the article, each link and each prior comment. In this way, we'll all benefit more as members of the SeekinAlpha community.

    Thanks!!
    Dec 22 03:05 PM | 2 Likes Like |Link to Comment
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