Engaged the Chief Financial Officer (CFO) via conference call. We voiced our concerns about the nature of the deal. Whilst he was able to provide seemingly plausible explanations to the related-party transaction we remained unsatisfied as to the true arms-length nature of the deal.
Subsequently, a meeting was arranged with the CEO in Midland in Nov-15. According to both the CEO and CFO, the founders had insufficient capital to drill on this property . We note that the value of their holding in RSPP at the time was over USD800mn (versus the value of the deal at USD130mn and a capex figure likely much lower than that).