I had been accumulating the preferred over the past few months whenever the price dipped below $25. I was pleasently surprised to see these price above par, but I purchased them for income.
To anyone planning to purchase (or sell) these shares, like other low volume/float securities, you need to make sure you use limit orders. Even a small volume "market" order and produce a large price swing.
I also agree with the other posters that although these are redeemable in December this year, I would expect them NOT to exersize this option. The whole purpose of preferred/debt instruments is to fund operations. Although, the >10% cost of capital on these preferreds is high, IF they could secure long term funding at a siginificatly lower rate, they would do so and call them... But that is a big IF.
I also own dozens of other preferreds, eTRUps, CoRTS and other exchange traded debt securities, and the vast majority are never called and trade well past their eligability call dates.
Good luck to you all. IMHO, MHR's preferreds have a very good Risk/Return value analysis.
Very risky in opinion. This is a quite a speculative company. Not making money at present nor will it be making much for quite a while. No call protection or conversion rights that would make them more attractive.
Agreed, not_a_short is clueless. According to the recent presentation, MHR proeduction has climbed up to 3300 boe/d. Management is expecting Year End exit rates for 2011 of over 8000 BOE/D.
If you don't know much about the E&P industry, 8000 BOE/D is nothing to sneeze at. Gary is making good on his promise to turn Magnum Hunter into a full fledged mid cap producer.
Looks like the economics on the West Virginia wells are a heck of a lot better than I had expected according to the most recent presentation. IP rates were very high and gas is very liquids rich. I now am seeing how the PostRock deal will pay off, even though they paid full price for the acreage.
They ought to get the pipeline full within a year to 18 months! That will be a monster cash flow machine that can be monetized to an MLP (i'd bet that Markwest is interested).
Also, looks like MHR is sitting on $60 million in cash with probably another $50-$60 million in cash flow from production, meaning, the bulk of the $150 million dollar budget is covered.
Gotta love how irritated not_a short must be as MHR continues to consolidate in the $7's.
Now, can't wait for a few more Marcellus wells to be brought online!!!