Wednesday, 9 October 2013

#MXP Max Petroleum ii's keep buying - why?

Original Post below from 9th October. Updated ii holdings table at the end. Updated 19th November 2013

Max Petroleum frequently release holdings statements from institutional investors. Over the few years the ii's have increased their holdings substantially. But Why? This is one of the great unanswered questions of life for me, up there with why flies were invented and and how IKEA manage to make furniture for the price of a takeaway.

Considering Max's history, who have been accused of dodgy corporate practice, burnt the fingers of many ii's, but then relaunched themselves only to manage to risk it all and almost blow it all on the NUR-1 deep drill last year, - then why do they still attract share holdings from ii's in the billions?

There may be a number of possible answers?
  1. they know a takeover will be the outcome and are stocking up
  2. they got their fingers burnt in the placings at 17p and are averaging down just like PI's
  3. they think they are actually investing in Milan Airport (MXP)
  4. there is something else going on
I don't know. I'm a bit stumped. There must be a good reason for them to keep buying shares. Maybe they really have lost a fortune but have now been reassured that it will come good as Max do seem to be on a surer footing - the near fatal episode with NUR-1 and the subsequent support from the banks perhaps really has been put in place with no wriggle room for the BoD to muck things up again. There was a time not long ago when Max must have been close to going under but the banks stuck by them and they seem to be moving forwards, although of course the big question (apart from whether they will drill the deeps) is whether they will be able to pay down the debt, drill appraisals, and pay costs from next March when the repayments start.

With production rising from the shallows, a year end target substantially ahead of where they were last year, and Haliburton now project managing the future opportunity with the deeps (subject to farm in) there is much to be positive about with Max. I remain a holder myself, hoping that we may finally see some proper forward momentum now. I want increasing production matching expectations, consistent and positive finance turnaround into 2014, a farm in for the deeps sometime Q1/2, and then debt to begin to be paid down from free cash flow. I think that is just about all possible, and recent drills should lead to a increase in reserves and a new CPR within a couple of months. That just leaves the question of why ii's are still stake building.

Here's hoping they know something that we don't and that the above progress is firmly on the cards and therefore that's the reason they now own somewhere in the region of 80% of Max Petroleum.

For Reference:
Below are the latest ii reported shareholdings according to news releases and the web site. Accepting that this will never be 100% accurate, ie some will have changed and not triggered a notification, but it gives you a feel for how the holdings have changed over the months. I will keep this updated.

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