<< AOL is still very active with AIPN.
I took the liberty to copy, and post some writing from Mr. Bouhafa to the SI for the benefit of the still....long. ;-) Hope he wont be angry at me.
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Subject: Week In Review/Random Thoughts
Date: Sat, Nov 8, 1997 10:00 EST
From: Bouhafa
Message-id: <19971108150001.KAA27354@ladder02.news.aol.com>
Well, it was an interesting week for AIPN...lots of news and, as usual, lots of speculation in part fueled by a misstep by the company's "PR" firm. Let's start with the most recent news item:
QUARTERLY REPORT: The after the close release on Friday of AIPC's 3Q results was clearly an effort to low-profile the news. The fact that the filing seems to have occurred earlier than expected tells me that the company wanted to get the only item that could even remotely be considered negative out of the way ahead of what I believe will be a series of very positive announcements. Furthermore, it is a truism that there is not a single
knowledgeable shareholder who expected anything better than what we got on Friday. It was a non-event, folks. Robert Cohen & Co. are what I would consider the "smart money" in this story. They had to have known about the 3Q at least 20 minutes before it hit the DOW (but after it was officially released). What was Cohen doing during those 20 minutes before the close on Friday? They were buying more stock at $5!! That fact alone should be convincing
evidence that this 3Q is a non-issue. If Cohen & Co. had thought for one minute that its release would depress the shareprice on Monday, I guarantee you that they would not have been buying stock at $5 on Friday. If the "smart money" is not concerned, I don't see why any of us should be. The company was known not to have any revenue source in the 3rd quarter and, therefor, no earnings. Guess what, it turned out that we were all right. No surprise
there.
Now some people were a bit concerned that there was no mention of the JV negotiations and that George Faris' comments seemed to suggest that AIPC was preparing to go it alone for the time being. First off, George's comments in the 3Q were "boilerplate" in that I've been told that you can find the same language in previous releases or SEC filings. Does this mean that AIPC plans to, in fact, go it alone? I seriously doubt it...although George
probably wouldn't mind having his negotiating partner(s) to think he is reserving that option. Also, there is no reason whatsoever to repeat the fact that JV negotiations are ongoing in a low-profile news release. After all, the company already addressed that issue in a press release a few days earlier. That issue need not become a standard insert in every subsequent release. It's absence from this one is inconsequential.
Now let's talk about George Faris and his "vision", if you like. There are some who believe that George Faris is seriously planning to become a major "oil guy". Well, while it is hard to say this with any certainty, my "gut" tells me that that is simply not the case. Yes, he has a vision, but it is not as an active "oil guy" in Kazakhstan. He has other plans. Just as the Kazaks are using AIPC as a vehicle to secure an attractive on-going
interest in a very valuable part of their natural resources, AIPC is using this deal as a way of securing serious capital which George will be able to use to his best advantage elsewhere. While he may pursue other investment opportunities in Central Asia, his main concern IMHO will be to bolster his business interests in the more stable political and economic climate of the U.S....and that spells R-E-F-I-N-E-R-Y operations supplied with Venezuelan
crude. It is my firm belief that George has no intention of worrying about pipeline availability in Kazakhstan, or the threat of Iran, or China, or Russia, etc. He will leave those potential troubles and concerns to a major. My guess is that, when all is said and done, AIPC will retain a passive 20% or so interest in future revenues from the concession while using a substantial amount of cash to invest elsewhere. If Kazakhstan should one day fall
apart, all AIPC will have lost is its 20% paper interest.
THE HUNTS: Without going into a lot of detail, let me just say that the "Hunts" seem to have become serious investors in AIPC. We can be absolutely sure that, before these guys parted with $10 million and agreed to accept notes and warrants that are convertible into common shares at $6.25 if the company's stock exceeds $8.33/share (I know its more complex than that but let's go with simplicity here), they were provided with privileged
information about the companys' near-term potential. These guys, it would seem, have every reason to believe that AIPC stock trades higher than $8.33/share by February 12, 1998....my guess...much higher. Once again, we have "smart money" talking here and we should follow its lead. AIPC has already gotten $16 million from these investors. If the stock trades above $8.33, they will, in all likelihood, exercise those 1.7 million warrants at $6.25
thereby providing the company with another $10 million. Also, remember that another event can occur above $8/share. The company can call in about 7 million warrants exercisable at $4 each. That's another $28 million. So, with the stock above $8/share, the company has the possibility of being capitalized to the tune of about $54 million (less whatever they have spent from the first debenture deal). Even if the dilution left the company with an
additional 10 million shares outstanding, it would still be sitting on $1/share of cash....and that's not counting KAZ or refinery operations in US. My prediction: we get beyond $8/share fairly quickly.
RECENT HIRINGS: Pavloff and Kunevich have excellent credentials. However, it was the appointment of Kunevich that attracted my immediate attention. He was hired as Manager of Corporate Development for Kazakhstan and THE OTHER CIS COUNTRIES. What that tells me is that AIPC plans to seek investment opportunities throughout the region. You don't make plans like that unless you have high expectations of soon having a lot of investment capital. I
regard that hiring as an extremely strong clue to George Faris's belief that AIPC will sitting on a significant amount of cash in the near future. The appointment of Pavloff was also interesting. Not only are his credentials impressive (12 years with Phillips Petroleum) but it turns out that someone at Millennium told a friend of mine that "the major oil company" for which he is currently a consultant is none other than Mobil, the very company that
is rumored to be in active talks with AIPC. Take that for what you think it might be worth. I take it seriously. Finally, the "Wooddy issue" remains a mystery. My "gut" tells me that his family did play an important role in his decision to back out of his job with AIPC which would have required him (and them?) to live in Kazakhstan. I could be wrong. Maybe he did serve a purpose as some have suggested. If that is the case, we will find out someday
once this story has been told. In the meantime, the "smart money" doesn't seem concerned about his departure. We should not be, either.
REFINERY NEWS: This was clearly a positive. With just this one refinery, AIPC is expected to have revenues of about $30 million in 1998 (Cohen Report) with $5 million in gross profit. While that only represents a few pennies in EPS, my sense is that we are going to hear more about the refinery business. George spent $2 million up-grading the plant in Louisiana. He clearly places some importance on AIPC's asphalt and jet-fuel business. My
guess is that he plans to expand in that area and that the financial package that he has talked about for 3 months will have something to do with executing those plans....and that brings me to my final category...
MILLENNIUM'S DISCLAIMER: There is no doubt in my mind that someone at the "PR" firm told shareholder Tom Clarksburg that AIPC was working on a "9 figure" financial package put together by a well-known investment banker. In his post, Tom used the number $100,000,000+...note the plus sign. Now, if this information were false, Millennium would have denied the "9 figure" assertion which was repeated extensively on the Internet....but they did
not. They also could have denied the "100,000,000+" figure...but they did not do that either. In fact, they did not really deny anything. All they said was that the $100,000,000 number (without the plus sign) was a "misunderstanding". Unfortunately, nobody had ever said anything about a $100 million package...it had always been $100+ million. A "misunderstanding"? Yes, I believe it is. What MILLENNIUM was, IMHO, telling us was that the package is
for more than $100 million. My guess is that they are right and I am grateful to them for clarifying this issue for me. Should they be talking about things like this to shareholders? Absolutely not. Should they have put out this disclaimer worded the way it was? I would not have. I would have just let the speculation die instead of drawing more attention to it....but what do I know about PR?
RANDOM THOUGHTS: The next thing that I am looking for from the company is the announcement of a completed Production Agreement signed by the Government of Kazakhstan. Since George told the NYC meeting in July that it should be completed by the end of October, I suspect that we will hear about it next week...perhaps as early as Monday. Remember, there can be no JV without the PA. Once that announcement is made, I expect AIPC's credibility to
be significantly enhanced within the investment community and would not be surprised to see institutional money start flowing into the stock...especially if it is trading above $5/share. If the finance package follows closely, AIPC will suddenly become a much less risky company in the eyes of Wall Street. The association of the company with some well-known firms will attract the strong interest of other firms. Once that package is announced, we will
probably be dealing with a whole new company and I would expect Robert Cohen & Co. to quickly revise their 12 month target of $10 upwards. The bottom line is that November should be an exciting month.
Thank you to those of you who have had the patience to wade through this lengthy post. Sorry, for the time it took.
Cheers....Faris
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