I am hoping that 14 will be a year of stabilization for HK, following the horrendous performance of the company and the stock in 13.
But realistically, it is hard to envision a great year for the stock because fundamentally the company is pressured and the outlook is poor to cloudy.
There are many ways of explaining the above.
But here is a relatively simple way.
Recently because HK is facing an underfunded situation (despite all the debt and equity capital raises) , HK announced it would cut back cap ex and issued additional $400 million in senior debt, and also announced that it plans to sell in 2014 more leases to help solve this underfunded situation.
They already used the$ 400 million to decrease the revolving credit facility which was getting too high , and cash flow is not enough to do the cap ex plus service the debt and the corporate expenses. When they attempt to sell leases, it will be a buyers market , and everyone knows it is a fire sale, so they will be selling at desperately low prices, causing further capital losses and writedowns. They will also have to draw on and ultimately max out the revolver as the calendar moves from the beginning of 2014 to the end. So maybe they meet 2014 expenses by a whisker
What then for 2015?
they will be in the pickle, having to issue more stock/debt to raise cash for 2015 expenses. There is absolutely no way they can avoid this. If anyone does the math and can show where this is wrong, please bring it forward. But you can't because it is not wrong. I doubt they can raise sufficient cash for 2015 by debt alone, they will need to issue more stock.
As such, any rally will be muted as the hoards of people wanting to get out at even or closer to even will sell on any rally. Many on this board will do so.
valueman60 • Nov 5, 2013 9:12 AM Flag
users liked this posts
users disliked this posts
work and grow,
they are going to sell other producing properties that they will consider non core.
read the press release again.
if you take that into account, they will still be growing production dramatically in 2014, 40 percent is the figure estimated in the press release. That is great, especially while doing it at the same time you are deleveraging the balance sheet , reducing cap ex and lease operating expenses. A double edged positive sword instead of a negative as we have had til this point.
You change opinions too much to be credible! Are you long or short?
Valueman you seem to do your DD. My question to you is have you changed your position. You stated Nov 19th that HK was undervalued and sellers were panicking and unjustified. If I were to believe or agree with your post I would say you would be a seller of HK or maybe even short. Not sure I follow your strategy if you are still holding and believe what you post. I do read your posts cuz they do have content!
TO ALL MY FOLLOWERS:
Here is how they do it... they have over 800 million revolver available right now, they have cash flow of 800 million plus coming for 2014, they are selling non core assets for 300-400 million... that's 2 billion plus available, with capex of 950 .... and wait what if that 3800-42000 is a low ball number ? well they grow cash flow even more to say 1 billion, AND soon they will announce a significant increase in reserves based on pad drilling in El Halcon and Bakken, when they announce new higher reserve estimate that will increase their revolver adding more liquidity. But wait there is more...if they have ANY positive developments in Utica (Trumbull county) this will add to reserves and add to production, Utica is currently contributing zero to Boe/d. AND if they can show a significant decrease is cost per well due to pad drilling/downspacing this will improve #'s as well.
WHAT MAKES YOU THINK THEY WILL MAX OUT REVOLVER?? 800 million free cash flow or higher plus 400 million divestures with a 950 capex .
Its really quite simple if they can get cash flow over 1 billion and growing and at same time reduce capex due to improved techniques... they will grow into debt nicely.
Its all about production growth...
IF HK decides to sell acreage or their leases It will not be a desperate fire sale, more like a bidding war. Other oilers know the value of the dirt and will be willing to pay up big for it. Supply and demand 101! They have enuff land leases and acreage to be selective in what the put up for sale. I welcome portfolio management. With oil at $100, economy getting better, well costs declining, land prices increasing, production increasing, capex shrinking I think these next several years are going to be AWESOME for HK. Floyd is getting heat about their balance sheet and that will change for the better. I like the story heading forward!!!!
I don't pretend to have your knowledge, but from what the locals are telling me in Texas, the 4qt should show a great increase inproduction with good prices and that should push the p/s into the mid $5s pretty soon.