The do have the ebitda forecast at $500 mm after the sale. Debt is $1700mm now, project $1730 year end after sale, plus $325 pref., $2055mm plus $335 equity now, $2390 EV, 4.8x multiple. Morgan Stanley had a 5.2x multiple on the base case for a $7 stock. $500mm ebitda at 5.2x, gets you a $7.90 stock. The metrics actually look better now than before the deal, at least it doesn't appear that there is much downside if commodity prices stay in the $90, $4.50 range. Again, they could be close to 40k boe/d at the end of the year. If they can show success in the Anadarko, the multiple could get to 6x, and you get to a $10+ stock. Seems the expectations are fairly realistic now.
I don't recall anyone mentioning stack pays today, other than Crum's answer that the cores indicate oil in the heart of their acreage which you have argued wasn't the case. He said they have enough to do for the next couple of years just drilling the Miss and Anadarko wells. As for SD, they are out spending cash flow also for the next couple of years. As for well cost, SD said their $2.9 mm wells at return 60+%, MPO at 10% more cost and 30% more on the EURs, still sounds like a good result for MPO. The open holes at $1.5 mm less cost, seems trying to improve the NPVs was a good move. Saving that much per well and still producing the same returns, sounds like good management to me. And I bought back in at the close, imo, a good value at $5, in fact a much better bet than before the report, imo.
Not sure self funding was the goal, just funding this year was a concern and they now have liquidity to the end of 15. And looks like they will sell the other piece of LA and possibly JV the Anadarko. I could see them partner with someone and buy more acreage in the Anadarko, lessens the upside but lessens the risk. There are plenty of other e and ps with as good or better geology and not sure another has the MPO leverage. There in lies the opportunity, if they can grow there way out of it. Time will tell.
That's why they call it a pilot. The IPs are still much greater than SD's experience and even in SD's core, and SD claims they are in mid 60% IRRs for 380k boe EURs. Maximizing NPVs is the goal.
The Company now has 139 wells that have been on production for more than 30 days and those wells had
an average peak 30-day initial production rate of 545 Boe per day. This rate incorporates results from the open hole pilot program, which placed a number of wells for testing purposes on initial production before fully stimulating and completing them.
invest, hope you make money on MPO, but take a look at PDCE, think they can double by end of 15, maybe MPO can, but you have better geology and a great balance sheet. MPO is a good bet but for the risk, imo, there are better long term picks. Not saying MPO shouldn't be in a portfolio, but others look better on a risk adjusted basis. Having said that, MPO should be in the $6s now. Crum did do a good job, the analysts do ask some silly questions, that one about acquisitions was more than silly, for a co that just found a way to fund what they bought, he answered diplomatically. And the one about other zones, they are pedal to the metal to produce cash, are not going to be doing a lot of exploration for a couple of years, but encouraged that they said there is Woodford oil in "the heart of their acreage". Let others do the R and D. And I'm convinced now that they have by far the best geology in the Miss play, doesn't matter how good an operator you are, if you don't have the geology, not much you can do. And the Anadarko seems maybe the next big deal in plays. His old co APA and others will help their cause. SD is showing 60% IRRs on their Miss wells and seems MPO's are a step better, so maybe 80%+, those are good numbers, would rank among the top tier plays. Used to think it was a triple but don't think that's reality now, but a double is certainly a good bet, and they are funded to '16, and they could improve on that with the sale of the rest of LA. The converts kick in at $11, so seems they could get there by next year and then it's about tapped out. $11 is a double.
Repeating myself, but after this reset from the heavy short position and the realization that liquidity is not an issue for the next two years, the stock should find a new level of value, seems it's ~$6 but the oil price has to cooperate also and it's moving in the wrong direction. At some point, the traders have to move on and the long term holders will own the company. I would guess most will move on. Long term investing is not near as much fun as trading. Good co but for me, there are others I would rather own over the next couple of years, PDCE, BCEI, GPOR, SN, GDP.... better geology and much better balance sheets.
Bottom line, they have liquidity to '15 and will sell the remaining LA, could get another $200mm. The funding issues are behind them and they have probably the best Miss acreage in the sector and the Anadarko sounds very promising, Crum should know the area. This is a decent hold for the next year, not sure I would put it at the top of the list, a $10 stock is all of the stars align with oil prices and execution. They have put the LA fiasco behind them which if you think about it, that was the co to begin with and it's now a $400mm value. EV is now $2.4 billion and PV 10 is $2.1 billion. Seems the $4s are history. Seems it should be at max 5x multiple on this year's ebitda, that's the almost $7 stock price, a 30% return min.
They said they have "cores with Woodford oil in the heart of their acreage". Can't see how the shorts would not want to cover, the price responds to that and then it's a long term proposition.
Ebitda guidance is $500mm after sale. At a 5x multiple, $2500mm EV, less $2025mm debt/pref after the sale,
stock price would be $6.90. At 5.5x, stock price is $10. I think those are good expectations for a year out if oil prices don't crater. Seems the shorts will be leaving unless it's a bet on the oil pricing going to $80, then MPO is a $4 stock again but it will be around, plus they plan to sell the rest of LA. Don't think it's going to be a moon shot today, probably get to $6 as shorts cover and then it's execution. $7 to $10, 40 to 80% upside. Not bad but the balance sheet risk is greater than others.
Also 30 of the 140 Miss wells were open hole completions, so the 545 boe/d rate looks even stronger, "best rock" in the MIss play. And the Anadarko is just beginning.
MPO is fighting the sector downturn, WTI sinking, a bunch of people still believe it's going to $80, not going to help the whole group, don't buy it but could happen. MPO is a good co but not in the absolute best plays and fighting the balance sheet. If the WTI doesn't hold, won't matter what they do. Just playing around with the capex, $550 mm gets you 8k/d of prod, using cbd's $70k, that's about right, so you added $550k of value and you have to borrow $200mm cover the capex. $350mm of value / 69mm shs, $5 per share of added value. But there are others that look like good bets with no debt issues, PDCE, BCEI, GPOR, SN..... and they have better geology, which investors seemed to want to go to first.
cbd, you may be light on debt/pref, the q4 no was $1.7 billion debt, plus $325mm pref, just guessing $200mm plus on debt to end of year, that's $2.225 billion, that's $7.30 stock price. At 6x ebitda multiple, $500mm x 5, less the debt/pref, that value is $11 per share. At 5x, the stock price is $4. I would guess the $7 is a minimum and maybe a good expectation, if they execute well, probably $11 if they can show lots of success in the Anadarko. And then you have the pref kicking in at around that price. Seems 50% is a good expectation and a double if they execute well and commodity prices cooperate. With the debt, a slight variance from plan skews the values, we have already seen that in the guidance, but who knows they could be sandbagging now. The numbers above don't take into account the sale. A $170mm deal pays the debt for a year. The pref converting is going to put a lid on the appreciation beyond $10 shorter term. Seems a good double possibility but with risk and not the potential we had a few months ago. The conference call should put some color on the potential.
On the surface looks like a better than acceptable result, about what was expected from LA, that's $85k per b, x 5x, that's $400 mm plus, $119mm ebitda, mu guess was $116mm, reserves seemed a little light, thought it would be 140mm. Miss wells holding up over 500b/d 30 day rate. Good Anadarko results. Guidance increased. Probably gets to $6+ but sill faces spending $500+ mm spending and funding gap. Definitely wasn't a $4 stock. You were right, the shorts will be scrambing.
A beer or two.
cbd, just read a piece that the private equity buyers are looking for pure play companies, those in one basin primarily, PDCE and BCEI come to mind, not sure NBL and APC need to buy more acreage but how about a merger of the two, since BCEI is without a CEO. Seems there would be synergies, savings. That would be a great fit, CS raised BCEI's target to $61 and sees $4 eps next year and $5 in '16, that's kind of remarkable to me, a small co that is selling for
I sold some, this could go either way, problem I have is there are better longer term cos over the next couple of years vs the low valuation on MPO, and we have been burned before, maybe that's the counter argument, low expectations. Good luck.