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Gold/Mining/Energy : Harken Energy Corporation (HEC) -- Ignore unavailable to you. Want to Upgrade?

To: drjoedoom who wrote (3127)	7/6/1998 11:34:00 PM
From: jackie	Respond to of 5504

Let's say I want to fly to Europe this fall. The tickets could run around $3,000. I could pay cash, however, this is not convenient and furthermore, I know I will be coming into a large sum of cash from an inheritance. So I charge my trip on my Mastercard. Not only do I get my tickets now, and cut my need for immediate cash, I get some air miles for future trips. Someone tells me, "Oh, I had a cousin who went broke using credit cards." It turns out, this cousin was unemployed, had no money management skills, and was spending $5,000 per month on plastic. He would roll the amounts owed from one card onto another. Eventually, he went bankrupt. This someone sees only the use of plastic as the basis for the cousin's downfall, improperly drawing the conclusion I was headed for the same fate. I think everyone can see the point. Any financial instrument can be abused. There have been plenty of companies done in by imprudent borrowing from traditional sources, no need to get exotic for bankruptcy, you just need to be stupid. Remember all the handwringing about derivatives a few years ago when Barings went under? Barings lost out because they handed a credit card to a gambler, that is, the right to trade in their name given to a trader. He bet against the yen. He lost. Too bad he didn't wait a couple of years. Obviously, a floorless security, in excess, could be very threatening to a company already suffering from poor management. Yes, the $15 million in the series F convertibles, is not chicken feed. But it is not the ranch either. It is a calculated risk. It's true, Cousin Sally could successfully challenge my Uncle's will, and I won't get the $1 million. But it is unlikely. But I have a good job, and I can easily make up the $3,000 in airline tickets, even if I lose. Likewise, Harken could hit a dry hole in the Cambulos. So what? They already have a substantial find in the Bolivar. For heavens sake, they have oil squirting out of the ground at rates threatening the safety of the drilling crew. It is only 4 miles from all the pipeline capacity they will need for the next 3 or 4 years. Wouldn't it be terrible if 100,000 bpd capacity was not enough and they had to pay for more pipe? And that with the government paying half? No doubt the $1 billion in financing the company has talked about, non-dilutive financing, is predicated on some good hits on the Cambulos. If they don't hit, what will they need the money for? They have enough to finish some production type drilling of the Bolivar, they float some loans to build 4 miles of pipe, and we're in the money. Look at the track record of this management. Who would have thought we would be where we are today three years ago? Are they stupid? I don't think so. Yes, they are taking a risk. But it is very manageable, at worst case. Now what if they do hit the Cambulos? Just my thoughts. I was going to use the left side of my brain to go through the tedium of calculating the numbers, but I was too tired. So this is my intuitive side arguing. Regards, Jack