They're waiting on an air permit for the stewart winland Marcellus wells. They had a delay getting air permits for a compressor station for the pipeline once before (I think, it was a few months back). Not sure if its MHR dropping the ball, the locals being a little overwhelmed with all the activity, or both.
Exactly, its not an industry or a region to work in where you can target specific dates 3 months out. I'd prefer they get rid of that slide, and instead say we are currently drilling pads x,y,z, drilling and fracing take about this many days, so we anticipate pads x, y, and z coming on to production sometime in the fall. Just dial back how precise they are trying to be.
Cimarron - when it changes every month, its not anything..there are wells whose results are overdo by 6 months. Dont put it out there with specific dates, and then miss the dates horribly. Its called communicating to investors.
And drilling one less well w/ estimated production of over 3,000 boe/d helps hit that target rate how? Im guessing they dropped one Ormet to assure the other 3 come online before year end, but how short sighted is that? Just hook the damn wells up, stop promising dates you never make, and get rid of that whole slide.
Because the deal was between MHR and Morgan Stanley Infrastructure, not MS as a whole. And pretty sure with Dodd Frank MS isnt allowed to buy half of an E&P business for its own account. MSI is allowed to own commodity transport businesses since they and GS were grandfathered in from the exemption that affects every other large financial institution.
If the fact that Gary Evans has told you that drilling Marcellus and Utica wells generates the highest rates of returns for shareholders isnt enough, the fact that every other E&P is doing the same thing MHR is doing with the pipeline is further proof that you are incorrect in your assumption that the IRR of the pipeline is higher than the IRR of drilling.
And every other small and midcap E&P, including AR and CNX, both of which are large local peers, are planning on an IPO of their midstream systems in order to fund drilling. Further proof that drilling is a higher return activity than pipeline ownership
Ok if you want to own a pipeline buisness, you're in the wrong stock, since the vast, vast majority of cap ex MHR spends is spent drilling. Second, if MHR's oil and gas wells deplete, pipeline volumes deplete - the pipeline only succeeds as long as drilling in the basin continues successfully, and since MHR is a top 2 company pumping gas through the system, if they drill less, volumes will grow less quickly. And trust me the IRRs in the pipeline business are much lower than drilling oil and gas wells. MLPs talk about rates of return in the 20% range, everyone in the Utica and rich marcellus is talking about IRRs of between 35% and 100%.
Drilling Utica wells at 50%+ and up IRRs will increase shareholder value more than investing in the pipeline. MHR isn't going to spin the Eureka MLP out to shareholders anytime soon, probably not ever- they need the cash.
The Ormet #7-15 UH well disappeared from August to Sept. Also if they're still waiting on permits not sure the SW gets on in the next 4 days. Hopefully Gary adds a lot of color at the conference today.
I like MHR under $5, MRD is sort of interesting but I'd like to see more data from them, and I think HK is interesting here too, but its a volatile stock in a play that they havent determined optimal completion rates yet, and it seems to be one of the more challenging places in the US to drill.
I think oil prices could continue to come under pressure in the US, and I think last winter showed the market that natural gas can get burned very quickly if it gets cold - so I'd rather be exposed to low cost natural gas drillers than oil names. I also think demand for nat gas will ramp in late 2015 and beyond as export facilities come online.
Production there is running at under 80 MMcfe/d but the company has a market cap of $2.7 billion. You get more bang for your buck in other names
I dont think so Lex - my brokerage acct showed open interest of 954 contracts vs volume right now of 7,960 - so its likely new positions. I'm guessing that the call purchases are driving the stock price, as market makers sell the calls and buy the stock as a hedge.
Either way, someone is betting that news comes out in the next 36 days, and that its positive.
Natural gas is moving up here, and we're still well below the 5 year average in storage. If last year taught me anything, its that the large number of fuel oil to gas conversions that have taken place in the last 3 or 4 years can really cause demand to spike if it gets cold. I live just outside NYC, and apartment buildings up here are switching to nat gas from fuel oil at a record pace, as fuel oil #4 and #6 will be banned in NYC in the near future. A cold winter and nat gas spikes over $6 - and hopefully Gary lays on hedges like a madman.