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Gold/Mining/Energy : Grey Wolf GWX - was Cascade COL - ASE
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To: marcos who wrote (40)1/30/1999 9:45:00 AM
From: Enigma   of 80
 
Marcos - I think the rollback is absolutely inevitable - the company signaled its intention to the market by saying it planned to acquire 50% of New Cache - or its assets - I can't remember which. This would obviously mean massive dilution - so it would be possible for there to be 250 million shares issued - which the market would take a very dim view of indeed - in fact there are far too many shares issued right now - about 127 million fully diluted - anyone I mention Grey Wolf to now takes one look at that and says 'no thanks!'

All of this is a shame because this company has had spectacular success (the 2 dry holes up north are a shame - but this is real high impact stuff and all 5 holes could be dry - but hopefully at least one will be a big strike). GWX is in the enviable position of having very strong cash flow (the last figure I saw was $9-10 million per year), and a good balance sheet and lots of upside on the assets it has acquired. Also the management deal it has for its parent Abraxas gives it considerable off balance sheet leverage - because it can maintain a staff fitting a much larger company.

I'd like to see a 1:10 rollback, followed by a financing, followed by acquisition of 50% of New Cache.

Would shareholders bail if a rollback is announced? Probably not - because the problem is so chronic that the market price seems to reflect it already - it's a rare day when the shares actually trade. You're right a sneak bid would offer little risk, and upside - with patience.

dd
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