As Gary has stated...MHR is going to start getting a $10/bl premium for their crude in 2012! This means about $6mil extra using 45% mix for crude. That is approx $.03-.04 for EPS using an avg BOE/d of 14K. That is a pretty big deal for a company like MHR. See what Gary said reference this development....
We've also, in the last quarter, signed a new marketing agreement whereby we have about a $10 premium above WTI for our oil because of the quality of our oil being equivalent to LLS. So this has really been a fantastic marketing quarter for us. And we've signed a six-month contract to gather our crude under that advantageous pricing.
Another real positive is the Capex for 2012 is covered per Gary. That is a real big deal...no surprise new issues of stock. OAS and KOG both fell on their sword and missed production fcst....MHR hit it dead on and I believe will be increasing BOE/d production for 2012. Here's what Gary said about capex....
I don't know how many times I've got to say this. And I'm going to say it again. This company is fully funded without having to raise a dime of equity and a dime of additional debt to fund all its capital needs for 2011 and 2012. And, you know, if you don't understand that, please call Ron, please call Brad, please call me and I'll walk you through it. It's fairly easy math. So we have no funding gap. And I don't know how those rumors continue to go out there in the marketplace, but they're hogwash.
Overall MHR seems to be doing everything right. However, I attempted to again see how 4thq revenue and EPS may shake out with a firm figure of avg 9166 Boe/d for 4thq. My assumptions are: -45% crude -no effect of derivatives and I used an avg crude price of $91. This could be high, but EOG and MOR have already said their avg price was $94. Granted they are bigger and have a different acreage profile…so I may be high here. -1/3 of Natgas was hedged giving a floor price of $4.58 for the hedge portion and I used $3.00 for the other 2/3s of natgas production. The $3.00 may be a little low. -I didn't consider the effect of LNG since it has a small impact, but this would tend to under state revenues. -I up lifted expenses by 40%...this is again probably high, but i want to be conservative. -I reduced G&A to $10m (7mx1.40) since 10m of the $17 of last q G&A was one time charges. I have discussed this topic with the board before. -other income I left at $2m and preferred dividend at $4m up lifted some.
I come out with EPS + or - .01.....but it could be very close to a positive EPS..... I do not see any derivative impact or at least very little. So a +$.01 or -$.01 would be great in comparison with 3rdq of -.05 (EPS excl one time items) or -.04 which is the avg analyst estimate. The revenue estimate is $45m. This is very close to what I came up with…I was coming out around $46.5. Anyone Have some more color regarding revenues or EPS? k
Nice work! I think using such a low gas price of $3/Mcf is leaving some revenue off the estimate. I think it's safe to use $3.9/Mcf. And i think the higher volumes from Marcellus will lift the revs of the field operations (Eureka). I'd guess $51m in revs.