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Magnum Hunter Resources Corp. Message Board

  • rachinvest rachinvest Dec 13, 2010 11:25 PM Flag

    A Great Quote about MHR Holdings

    One of the honest bulls here typed this about MHR:

    ''' They (CLR) have some slides that show detailed outlines of of bakken/three forks boundries with diff. maturity/value levels. Sadly, I think the MHR/Eagle acreage lies outside the boundries. '''

    Wait until you see all the MHR wells max out at 500Bbls. per day at the same cost as KOG/BEXP wells that are all maxing out at 2500Bbls. per day.

    MHR is putting up the same HUGE capital investments for much less return. They were way late to this party due to the agreement Gary made with Cimarex to non-compete!

    It just is not always that great to borrow hundreds of millions at less than prime interest rates, wait around for rigs, try your best to get laterals drilled in the middle of the formation and not get off center for 3000 foot long horizontals, then even later bring in a frac job that takes equal precision and expertise. All the while interest expense is building and administrative expenses accumulate.

    These wells take a long time to bring online and A LOT of money is put up before a drop of oil comes up out of them. Give me a million dollar vertical well that will produce for 30 years with 20 year almost flat decline rates over one of these ten million dollar unconventional shale wells that have so much possibility for error, take so long, and need to pay out in the first eighteen months. Your margin for error with MHR is tiny.

    Interest payments accumulate, soon you are issuing stock and borrowing more money just to pay interest on your original debt and you are still waiting on the frac to be completed or the lateral to get drilled.

    Then you get nervous and do an acquisition that is a net negative for current equity holders but you are desperate to show earnings growth, even if it is earnings you borrowed money to pay up heavily for just to watch decline...

    MHR better have THE BEST wells in the Eagle Ford because of their capital structure, dilution, continued borrowing, lack of a single positive quarter of even EBITDA in company history... not to mention we just hit a LONG term technical double top around $6.00++. The first time in the 2006 oil hysteria and now we match it again. Last time in 2006 this stock got to $6.00 it in the following months declined to about 50 CENTS. Oil was $150 then - it is $88 now. Is a generational dual bubble top just in MHR?

    Look at a lifetime chart....

    MHR needs to GROW FROM THE DRILL BIT - and not the paper printer on Wall Street!

    Fact is MHR was LATE TO THE GAME and SCRAMBLED TO GET INTO THE SHALE HYPE back in 2006 when the smart companies had already assembled all the prime areas onto their balance sheets. EOG, BEXP, PXD, XTO, KOG, CHK, I could go ON AND ON....

    They are spending the same big 6-10 million per well to drill the 2nd and 3rd tier acreage, that is going to produce much lower returns....

    Keep dreaming the dream and keep the cult of MHR alive....

    Look at the bond market - they have negative outlook on this company and JUNK BOND RATING

    AGAIN MHR DEBT ARE JUNK BONDS - with NEGATIVE OUTLOOK - in other words - its dangerous to be a creditor of this company much less a common stock owner.

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    • Magnum's all about the Marcellus, at least over the next couple of q's, which you fail to mention.

      • 1 Reply to hedgiestrumpvcs
      • and the Marcellus has no environmental political risk where locals might kick out the "EVIL" frac companies based on encironmental hysteria and showings of movies like gasland to the liberals up there right?

        Since I first posted a warning the stock has fallen from $6.27 to $5.98.

        About 5%

        Is anyone man enough to admit I have been right?

        I am covering a little today - 5% in three days is nice.

        Still though does not change my long term view of this as an extremely risky "cult" stock.

    • Ah, this isn't the same MHR company that existed back in 2006. That one was sold to cimarrex. This company arose from the old petro-resources run by the Halls in late 2008.

    • The Bakken is the least important of MHR's three main operating areas; almost all of the 2011 drilling budget will be in Eagle Ford and Marcellus, where they bought their acreage far below what big companies are paying for it now.

      You have this issue precisely backwards in those areas.

    • you don't have to invest in mhr guy. heck i've been on board since 09 trading on dips and rises. your figures are not right on the cost of wells being drilled if you did your dd you might get a little bit of someones ears on the board. its a growing company and upward price of pps are growing who are you anyway not one of the regulars. cover while you still have drawers as we say in texas vamooose short

      • 1 Reply to mhorse55
      • It took me a couple of minutes to find this quote from Slabman but it was worth it.

        "Based on his advice I told all the gang here in the trailer park to mortgage their RV's and bet on shortie's recommendations. Ha Ha Ha!"

        This was one of the responses to the discussion about why MHR is valued at $450 million. Folks, it doesn't get much better than this. Every time this stock goes on a serious run we have random posters show up talking trash about the company. The share price definitely bounces around but that is what you should expect from an E&P company this size. The good news is that it isn't often that you find management this good in a company this small.

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