However, with shareholders losing patience, the shares have drifted to such an extent that the cash pile is now almost three times the company's market value. In addition, the company owns property, plant and equipment valued at $22.3m on its balance sheet, so after deducting liabilities net asset value of $54.3m equates to £37.2m at current exchange rates, or four times the company's current market value.
When Global Energy reported its half-year results last September ('Cashed up for cash returns', 22 September 2015), chairman Mikel Faulkner clearly stated that options being considered by the board included paying a dividend to shareholders or making an acquisition in the energy sector. The board has done neither, albeit the slide in the oil price since then means that there will be even more distressed cash-strapped operators now than before, so their inaction may have worked in its favour.
What the board did do was to lend $8m (£5.5m) of its cash pile to Everest Hill Energy under a six-month bridge financing agreement alongside Global Energy's major shareholder HKN, which lent $2m. Everest is an affiliated company of the Quasha family trusts, which have an interest in Lyford Investments, a shareholder in Global Energy. HKN, Lyford and parties acting in concert with them are interested in 22.5m Global Energy shares, representing 62.4 per cent of the issued share capital. Global Energy received an origination fee of $160,000 and under the terms of the bridge financing loan will have earned interest of $480,000 by the time the loan is due for repayment on 15 March 2016. At least this goes some way to cover the salaries of the company's 12 employees.
It's worth noting too that the bridging finance is secured on all of Everest's holdings of Global Energy and HKN securities, so there is every incentive for Everest to repay the debt otherwise Global Energy can take possession of the aforementioned securities on the cheap.
Although I am frustrated by the lack of progress on the corporate front, and can fully understand why some shareholders have had enough given that the investment has not worked out since I initiated coverage ('Insiders major buy signal', 17 December 2012), the bottom line is that the cash pile and loan to Everest are worth 2.8 times Global Energy's current market capitalisation. So even if you don't put ascribe much value to Global Energy's Bolivar and Bocachico contract acreage in Colombia, the current valuation is already so depressed that these assets are in the price for free anyway. So if you followed my earlier advice I would continue to hold the shares at 24p and await news on either an acquisition or a dividend for shareholders. The company is scheduled to report its 2015 results in mid-March, which also coincides with when the Everest loan is scheduled for repayment, and I would expect a further update at the time on the use of the bumper cash pile. Hold.
Please note that I published 10 columns on 23 companies since the start of last week all of which are listed below and also on my IC homepage....
MORE FROM SIMON THOMPSON...
I have written articles on the following companies this week:
■ Grainger: Buy at 243.5p, target 280p; Dart: Take profits at 580p; Crystal Amber: Hold at 159p; Redde: Take profits at 203p; Burford Capital: Run profits at 196.5p; Renew Holdings: Run profits at 404p; Plethora Solutions: Speculative buy at 4.5p ('Stock check', 5 Jan 2016)
■ Elegant Hotels: Buy at 118p, target price 130p to 135p ('Check in for a profitable stay', 6 Jan 2016)
■ Safestyle: Run profits at 272p ahead of pre-close statement on 25 Jan 2016 ('Clear cut gains', 6 Jan 2016)
■ Epwin: Run profits at 143p, new target 170p ('Epwin on the acquisition trail', 6 Jan 2016)
■ GLI Finance: Recovery buy at 37.5p ('GLI shelves fundraise and its chief executive', 6 Jan 2016)
■ LXB Retail Properties: Buy at 97.5p, new six-month target 120p; Urban&Civic: Buy at 286.5p, target 325p; Conygar: Buy at 172p, target 200p ('Hot property, 7 Jan 2015)
■ Somero Enterprises: Buy at 139p, target 185p; 1pm: Buy at 70p, target 82p; First Property: Run profits at 53p; Avation: Buy at 145p, target 200p ('Small-cap value plays', 11 Jan 2016)
■ 32Red: Run profits at 147p; Netplay TV: Buy at 7p ('Chipping in', 12 January 2016)
■ Cambria Automobiles: Buy at 87p, new target 95p; Vertu Motors: Buy at 76p, target range 85p to 90p ('Motoring ahead', 12 January 2016)
■ Global Energy Development: Hold at 24p ('Cash rich, but unloved', 12 January 2016)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking
