With all of the talk of flushing MHR, I thought I might remind investors (or stupid shorts that don't realize the short is over) that are UNINFORMED that MHR has several very large initiatives underway.
They are close to finishing the frac job on their first Eagle Ford Shale well. This well could easily have 700-1500 bbl/d of oil production. Granted, the EFS wells will experience high declines over the first year, perhaps as much as 90%, but the potential for full payback in 1 yr is very real, especially with $75/bbl oil. They have 2 more wells either in the process of being drilled or permitting. For a company with a little under 2000 bbl/d of production, this well will likely result in a near term boost, and will result in a modest increase after full decline.
They also have 2 Marcellus wells that are in the process of being drilled and soon to be frac'd.
They also have a nice pipeline system that they are JV'ing and should pick up some cash from the deal.
Over the next 60-90 days, we should see several important announcements that will shed some light on just how valuable the EFS and Marcellus acreage really is. I honestly believe the Marcellus acreage could be worth $1500-$2500/acre. They have 42000 acres, with most of it HBP. They have 21000 acres in the EFS, and Penn Virginia just paid around $3000/acre for land next to them. Once they get the EFS and Marcellus programs up and running, they should be able to grow production at a 20% clip for many years.
Imagine if you can fast forward a year to 18 months. It is quite possible that MHR would have:
12+ Eagle Ford shale wells producing (after hyperbolic decline) 50 bopd/well. That is 600 bopd. They could easily have 6-12 Marcellus shale wells producing an equivalent (again, after first year decline) of around 30 boepd per well. They could have a stable of conventional oil properties in Kentucky,W Va. and Ohio that have had the pipeline backpressure reduced, been recompleted or stimulated or had their lifting pumps upgraded, resulting in an addition 200-300 bopd in total production (across 2000+ wells).
They would own a 50% interest in a pipeline system that would now have a processing plant attached to it and collecting 3rd party gas and hopefully cash flow positive.
They have a drilling services division that is now performing work for 3rd parties, bringing in cash for the company, they have a salt water disposal system that will be more valuable as the Marcellus acreage becomes developed and finally, they have the Bakken, which may hold the potential for some serious production growth.
Will all of that come to pass? I don't know, but I know that MHR is not your typical small cap E&P with big dreams that never materialize. Gary Evans isn't interested in running a rinky dink little E&P. He wants to grow MHR and has executed on everything that he has said he would accomplish on previous conference calls.
I am very optimistic that they will bring in a strong partner for the midstream and that will be very important.
Thanks for the reminders. I am loaded up with MHR and sleep well at night even though I don't have much confidence in the overall market right now. I have been in MHR for almost a year now but any newcomers to this stock should feel fortunate to be able to buy in at this price considering the near term, and long term, upside most of us are expecting.