Tuesday, 29 November 2016

49. Cash-or-Trash #2 VNR

AKA, NASDAQ:VNR, Only mid 2014 the company share reached a 30 USD, directly followed by an all time low in december 2015 - january 2016. Looking at the company’s chart including dividend payouts (thanks again Google!) the share price drop and dividends paid look related. Whattup?

According to their webpage, the company is “Growing reserves via acquisitions”, “Focused on long term unitholder value“ and “Expanding our possibilities”. Where at the moment the Google finance page gives a 65.41 Dividend yield (Too good t0 be true right?) this demands

The corporate strategy reads: Maintain existing production, Ensure flexibility and Reduce commodity price risk.

According to the newswire fool.com the major headache of the company is cash. Translated into lower-financial grade language, the company has borrowed too much. Too soon. Before the oil and gas prices took a dive that is. Easy calculation:

At the start of this year the company held a 1.8 Billion USD credit;
During the year a 1.325 Bilion USD was borrowed on available credit;
During the year the credit worthiness was reduced to 1.1 Billion.

I believe it’s clear this causes some stir in the management team.

A rapidly approaching deadline is a 2.6 Million USD interest payment due February 15, 2017. On itself this seems feasible, however, their banks require a 50 Million USD security on the accounts.  

There’s more but to be honest I’ve lost my appetite after reading this already. Going for this share seems plain gambling where chances for win - loss are out of balance. Instead of kissing our money goodbye, make a more educated bet.

Kind regards,


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