David,
It is truly good to have you back. Sincerely. However, I still would have to take issue with you on several points.
First, market cap means nothing. I remember the same discussion a few months ago when SOLV was capitalized 100 million more than it is today. The same reasoning could have been used on Diana, and GIF - we all know their capitalization at this time - a big fat zero. So, the argument that the market allows SOLV to have a 150 million dollar cap now is interesting, but quite meaningless as a gauge of the future price.
Being an investor, to me, means having the ability to recognize trends and being able to change ones convictions about a stock overnight. I could do that, if SOLV, as you and others suggest, could get the investment banking they need. But, for the time being I don't believe they will. If tommorrow brings such a deal for SOLV, then I think I could buy without emotion. This is MONEY we are talking about - not a football game where the faithful support their teams until the final whistle! Smart money is not emotional - Smart money has no feelings for anyone or anything - Smart money is the MARKET - and the MARKET has taken SOLV to 7.00 - not the evil empire ran by Asensio.
Yes, we have all entertained pipe dreams at one time or another. But, pipe dreams are dangerous to your financial health when it comes to the market. From the bad roads that Jim Atkinson described to the latest 10q - these things all add up to seemingly insurmountable odds against SOLV "making it". There is (I assume) approximately 75 miles of bad road to SOLV - there aren't enough trucks at this time to haul bitumen - not exactly the optimum mode of transporting the stuff. It requires constant heat during transportation, least the stuff becomes a permanent addition to the tank it is in. What do you think this will do to the cost basis of producing bitumen for SOLV?
What about SOLV's addmitted failure to pay their debts? How many bankers would loan you and I money if we had credit ratings like SOLV's? Investment Bankers (keyword Investment) don't take chances if there is nothing to be gained. What do you imagine the Dunn-Bradstreet rating of SOLV is at this moment?
It always seems, to me at least, that the supporters of this stock are quick to defend Rendell and SOLV even though there is documented evidence that they misrepresented several key matters. One is to the total costs associated with producing bitumen - from 120 million to 600 million. I am astonished that they said they need another 600 million. Nowhere in the literature before their bombshell announcement did they ever mention these kind of capital requirements! NOWHERE! Yet they casually mention it in a press release one day - out of the blue - and no one seems to be alarmed at what appears to be gross negligence at being able to predict future capital requirements. No company I have ever followed has done this on this scale (miscalculating their projected costs by 400%!! For God's sake, the government doesn't even do it on this scale! How can you and others overlook this?
The "fact" that SOLV's lease has 4 billion barrels of oil - based on one hereto unknown geologists' report makes SOLV worth not one penny more. Their lease is worth what someone is willing to pay for it - about 850,000.00. The lease has intrinsic value - you cannot calculate the value of the company based on how much UNRECOVERED oil it might contain at 11 dollars a barrel. Don't forget the 100 plus years to extract it at 100k bpd and SOLV is producing - let's be generous - 15k barrels per day!
Why is SOLV so much more valuable than Syncrude, who is producing oil today in commercial quantities?
What if SOLV announces that they have obtained the financing for 600 million tommorrow? I will cover and might even go long. What if SOLV announces that they are filing bankruptcy tommorrow? Then I sit pat.
Your statements and support for SOLV in the face of all the facts, I beleive is very sincere, however misguided they might seem to me and others. In fact, I could almost admire your convictions if they weren't so self destructive.
Gary |
