throws off enough cash to drill the next couple wells on the same pad in fairly quick fashion. And it allows Magnum and its WI partners to save or divert capex into other areas. In this business that's the cash register ringing!
Way too simplistic. The next wave of production doesn't just add to existing production without something called depletion. Have you noticed that they don't give the investing community any type curve data?
In the midst of the coldest winter in decades coal the commodity and producers hasn't budged. When this becomes a hot political issue Obama and the democrats will ignore the logic of supply and demand and the fact that they helped steer it. They will however blame the traders on Wall street...Guaranteed!
From the Dec presentation they estimated 755Mcf/d for each well...H-1 662/boe H-2 1668boe H-3 1402boe...I think their on to something!
Just the timing of the change has me leaning heavy in the direction that they just closed a deal major enough that when announced is going to make Q4 an after thought. So might as well take care of the announcement and Q4 conference call and continue on...
For those very few that have the capital that the Hunt's have the market becomes a game of chess. They can stuff cash into a new company and purchase HK's Utica at "fair value' for a couple hundred million. For HK this would bring in much needed cash and without much reserves tied in it wont affect the bank borrowing base. For the Hunt's they get Utica properties to develop or perhaps sell in a couple of years. More importantly their 100 million shares of HK could rebound as fears of a funding gap are alleviated. The very rough math...pay $200mil for Utica to be offset by market value extraction of $130mil (~$1.30 to $5 on 100mil HK) for a net $70mil purchase price on Utica properties. For us who can't control the chess board we can only speculate on the next move.
It all comes from 2 maybe 3 individuals whom occupy a combined dozen or so handles. Every now and then I'll drop in and see if there's any insight. Nothing! You can actually become stupid reading this board.
I'm glad that MHR doesn't hedge in the traditional way as the Chesapeake's of the industry do. Shorting May-Nov contracts in the $4.30's doesn't seem logical at this point. As winter winds down and all the snow melts rain will likely fall on it which will flood a key basin in Marcellus. This would not be a good start for the industry that need's to replace sum 2.6Tcf that winter extracted. Also longer term I this looks like a big shift in supply and demand. Demand being all the power plants that were converted when prices were low (along with emission politics) also double digit growth in CNG. Due to the warrant conversions I was thinking short term that this might be dead money, so foolishly I sold at $8.31. Foolish because it's not about the short term trading but "Money In The Ground". And now Wall St knows it. It won't get cheaper for me to buy back.
This is what makes the outcome an interesting one to follow. An entity that insiders own a large stake in has convertible notes due next month. Some posters here have suggested that the entity shorted HK as a hedge on the convert 'stub'. Over the past year as the shares have plummeted the hedge would have gained. It's no secret that the market loves companies with heavy insider buying. This along with the hedges could have given insiders some "fiducia" to buy in order to counter the markets worries. The share price is critical for two reasons. First and foremost it's a huge source of capital for a capex intensive company, and secondly it's a major covenant to debt/cap. Equity is a huge source of cashflow and lenders to heavily in-debted companies don't have much of a stomach for plummeting equity. Since the last wave of insider buying the stock has rolled over to new lows. It will be interesting to see if insiders keep buying.
Part of it is volume itself has been volatile. You can go from a strong accumulation with almost 1mil in volume to days like today that can last for weeks. For this reason the MM's deem it too risky to hold inventory. I get that! However, when they naked short this, and the only risk is "failure to deliver" they then can take it to an extreme. The whole process has been played out for a while now. And it has affected the natural marketing of this stock. This process is breakable but it will need a very strong fundamental sway. And hopefully if that happens all this manipulation is just a weak levee holding back a rising ocean...Hopefully!
t0b00t has been pounding the table on an MLP spinoff of Eureka. Respectfully I disagree. Instead I'd rather have that cash go to Gary Evans so he can drill in the Utica and Marcellus, where the ROR is probably 5x vs. the spread that the pipeline operator gets. I just think a high growth Marcellus/Utica E&P that's rich in resource and cash would garner one heck of a valuation.
No bank debt and they paid off the last note. They recently took on a $1.5mil loan to buy commercial prop. in SD. The loan is backed only by the property. The firm has almost no leverage. You may notice a large working capital deficit. This is due to the turn-key accounting. The firm books revenue when investors sign on for the drilling program. The TK revenue is a liability until the firm drills a well. As of SEP "deferred turnkey revenue" was $7.2mil. The TK revenue is largely non-cash, and the firm isn't exactly binded to drilling under the program. The firm also has no hedges. With spiking natural gas and a book of $7.2mil of investors the firm is drilling more wells in Q1 than it had in the previous year and half.
You (management) have spent roughly $0.80 to the $1 on SG&A. If that wasn't bad enough when adjusted by taking out the turnkey revenue you're spending $1.75 on every $1. Does SG&A stand for sleight of hand, or do you simply lack managerial discipline? Also imbedded in the 10k I noticed you paid the PR guy (Mr. Tiano) $200k last year of which $150k was a bonus. How does someone in PR earn such a large bonus?
hard to disagree with what he says. If you add Interest expense and G&A to the drilling and completion budget they have a $1.4bil hurdle. It's a tough business when the residual wells decline 80% from completion an therefore don't produce much cash flow's in years 2...
For the investor on the outside looking in its a tough buy when 10% diliution is on the other side of the door. The original intent was to shake out the shorts. It may have helped accelerate shorts into covering then but now you can see its a going to be a tough hurdle to jump and shorts are going to try and take advantage. As a recipient of warrants I'd rather he let the strength of the business and market take care of the shorts.
Can't help but to think of the aftermath since that article. In the five years from when the it went private to the 2011 IPO the equity about doubled. At the same time the S&P was about flat with a crash in between. And since the IPO Kinder trails the S&P by a wide margin. You can see why Rich Kinder is getting testy. The Rex pipeline mentioned in the article as a big growth project was a bust. So in the private years the revenues and dividends didn't grow to the point that would warrant a five year doubling of equity. It sort of leads me to believe that the public market is in a way stupid in that it becomes bored with companies that have been around and then is overexcited when they IPO, even if it's the same one!...No wonder a lot of PE firms mint cash.
Maybe conservative stealth like accumulation. I've witnessed this with a few primary natural gas producers recently. As the market sells off NG producers are still catching bids even as the commodity has a day of retracement. Bottom line this winter has busted everyone's models and is in the process of annihilating working storage. When NG makes it's parabolic like moves it seems to happen during shoulder seasons. The folks that have always made cash on Wall St do so not by yapping on the "curb" in the "pit" or for that matter on message boards. They do so by acting...a few steps ahead of the market. This post might seem a little far-fetched but when I see huge hedge fund firms like DE Shaw or Renaissance Capital take $100k positions in these small illiquid stocks it makes one think.
As opposed to selling working interest on a leasehold the turnkey is a contract of working interest through a well bore. The accounting works as you stated. When a contract is signed they book revenue, probably all receivable. The deferred revenue is a liability until Royale as the operator fulfills the service of having the well drilled and completed.
Seen it before. Wouldn't be surprised if there's a significant announcement soon, Monday perhaps. May also explain the lack of insider activity. They can't buy or sell during material nonpublic information. We'll see.