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Magnum Hunter Resources Corp. Message Board

  • fastball.98mph fastball.98mph Oct 27, 2013 1:50 PM Flag

    Should they sell Eureka?

    The question is based on the CEO saying that there's an offer today that would net MHR $600mil pre tax. However, the assumption is now they can wait another year to year and a half and get around $900mil pre tax. Essentially the decision is to hold the asset and gain 50% hopefully in one year. But in the recent presentation, assuming flat O&G prices, they have around a 50% IRR in production. While you can't discount the decision entirely by 50% because naturally there's exploration cost, but you can't assume a guaranteed $900mil in a year either. If they take the cash today and plough it into E&P, and exit 2014 at 45k- 50k boe/d without much if any balance sheet expansion that's a huge value driver for the shares. Furthermore, the cashflow from the production of 2014 roll's right into simply accelerates production growth. I know Gary Evans is a former banker so he's mindful of present value's and IRR's. This leads me to think that this $1b offer had a large equity component. If it were cash he'd take it....Just my opinion...Your's?

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