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

To: Ed Ajootian who wrote (3196)	7/12/1998 1:24:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 5504

Ed, is the <g> at the end of your first paragraph like the end "Nicht" in a typical German sentence? (G). As to the specific of you post. The S-3 is just a registration of the estimated about 5,7 MM shares that could be issuable to the holders of the 15,000 shares convertible preferred F series. These shares are saleable into the public market effective with the registration (read page 10 "SELLING STOCKHOLDERS" and page 11, "PLAN OF DISTRIBUTION", particularly the fourth paragraph where short selling is specifically allowed). I used this specific S-3 to find the details of the various financing, not to discuss this specific registration. Since this S-3 they have also registered about 3 MM shares (connected with a recent acquisition, S-3 dated June 17) and another 13 to 14 MM shares (S-3 of June 27, which I could not access). This registration allowed me to print out the whole 26 pages document and in this manner I could study the various instrument a little better and catch a prior error I committed relative to the "Participation" (the $35 MM floorless) which I discussed in my prior post. The error was, to clear the air on that issue, that the conversion does replace the participation rights and thus, upon conversion, the floorless do not participate in future revenues from the proposed three wells (and I wrongly assumed that the flow of revenues from the well will continue even after conversion), the $35 MM are supposed to fund, and to the extent that any "distribution" on account of such "participation" occurred prior to conversion, it is taken out of the "payment" but not the interest. It still leaves a relatively hefty interest rate of between 15% to 25%. I could not find a "final conversion" date on the $35 MM participation, so apparently it is up the floorless holder to decide what is best, keep the 7% (I believe, but the S-3 of May 27, no longer mentions a specific participation rate) from those well, or convert at a 15% compounded monthly. If HEC finds that the participation rate is more that what it would give away with stock, it can force conversion with an interest rate of 25% (compounded monthly as well). Of course, by 2001, that participation will be more than $50 MM and thus HEC will have to face an interesting question as to what is best. By the way, at least the May 27 S-3 does not provide for a cash buy out of the "Participation", only conversion to stock and realization of the "payment amount" from the sale of the stock (if they sell the stock for less than , presumably, $35 MM the company must issue additional stock, see end of the first paragraph on page 5). I realize that there are a lot of "hopes" that an elephant field the size of Prudhoe bay is down there (Strain's report), but frankly, Strain has said the same about Arakis (10 to 20 billion BOE), thus I start and ask myself if these are the only numbers they know. <VBG>. Zeev