“Cal, boy, the one thing you can’t do, is tough it out. You’ll be dead in two weeks. A month tops. So what’s your poison.”
Cal Hammer, long time wildcatter, just glared at his banker — handsome, Sonny Silver, a managing director with Goldman Slacks. Cal hated the type: slicked back hair and size 38 bespoke suit. His nasal twang was the killer. He had one redeeming quality: money. $200 million, which Cal needed badly.
But he’d been here before. This wasn’t the first time that oil had crashed. The oil business was feast or famine. Six months ago, he had $180 million in the bank. This morning, he had $2.1.
“Cal, boy, make a decision,” implored Sonny. “My pilot doesn’t like to fly in the dark.
“Even in this crazy $40 oil dollar market, there are plenty of investors. They like Queer Eagle Energy, they’ve made money with you before, and they’ll invest with you again. Of course, they may squeeze your right one a little because they can; after all, it’s only business.
Cal knew that by slashing costs and no new drilling, he could live with live with $40 oil, but he needed working capital. The source of funds was the big question.
“Sonny, I’m leaning toward them bonds.”
“Cal, a private placement of oil today is expensive. But we can get you $200 million at 12 percent for 10 years in 10 days.”
“Ouch! That’s $24 million a year in interest.”
“True, but the first year’s free. There’s a buy-out clause of course and your 20 percent is protected. It’s what we call the Money and Greed Option.”
“Very funny, but cheap oil is here for a while and $24 million payments are not in my budget. So let’s talk stock.”
“Ok, Cal, boy, we can net you $200 million in a private but it’s going to cost you. New oil offerings are fetching 50-80 percent below a few months ago. There are investors who want to protect their stake, so be prepared to take a big hit on your holdings. Maybe down to a 10 percent stake.
As Cal was being squeezed, a plan suddenly began to form. In seconds, it all came together. Just like it always had.
“Now listen here, Sonny Boy, here’s what we’re gonna do.
“First, Goldman Slacks is going to float me $200 million of those 12 percent, 10 year bonds. But they’re going to convert to my common stock when the price gets back half to last year’s high. Second, sell $200 million of my common. Yeah, I know I’m exposing myself. Today, I own 20 percent of Queer Eagle but the time you SOBs get finished with this offering just make sure I still have 15 percent. Otherwise, there’s no deal. To sweeten your pot, I’ll toss in two points on both deals.”
Sonny Silver didn’t make Managing Director by procrastinating. “We’ll settle next Friday,” he said, shaking hands and rushing for the door.
Sonny’s pilot was in the air in 15 minutes.
Meanwhile, back at the oil patch, Cal was all grins. His company was stabilized. And now the SOBs had just given him $200 million to buy depressed oil properties in his playground.
It was good to be a flush wildcatter, again.
Bill Regardie was the founder of Regardie’s Magazine.
