I would like to think you are right, but the estimates of Rockpile and Calber value were based on day rates and transportation charges folks were willing to pay with higher price oil. Now the demand for both service company offerings -- particularly the fourth and fifth Rockpile spreads -- has fallen and the former projected values will need to be adjusted downward (and I am afraid the adjustment might be significant). That said, TPLM has two big things going for it -- low debt and the ability to use nearly all of Rockpile and Caliber to reduce its own drilling costs. Lex
HT: what do you mean by your statement that GE just pledged 2 million of his own shares for that very purpose? What is the purpose an\d how did he pledge his shares? Thanks for explaining......
Foolfinder: Is it really a stupid post when the $9 figure is thrown out there without referencing a time frame? IMO Mhr WILL be taken out for more than $9 -- and then some -- but it wont happen for another year or two because current deficit spending is too high and take outs typically don't happen for E&P companies until ebitdax nears capex. But MHRs assets are worth more than $9 and growing in value, so it will happen eventually making the prior post not so stupid as you suggest. Lex
Awesome well results, particularly since all three of the Marcellus wells are 45%+ liquids, which greatly enhances associated sales revenues from the production! Plus, production on the pipeline goes up and, hopefully, EHP doesnt have issues moving the liquids because of the giant dry gas flow from the Utica well.
Now, if we can just get some air permits and get all the high test rate wells into ongoing production mode. Very good news......
I do not claim to be one who is "in the know;" however, to address your inquiry, GE's slide 56 in the October presentation puts the value between $3.195B and $3.874B. The average of those figures is just shy of $3.4B.
On one hand, GE has historically failed to realize even his low side estimates on liquidations, so your $3b estimate may be spot on. On the other hand, the midpoint of GE's Utica acreage values is not far off from the CHK $13,000 an acre price, so maybe his low end value of about $3.2B is a fair number. Assuming the $3.2B figure to be correct, slide 56 puts the NAV per share net of debt at $9.38.
Just a few observations based on the presentation, and here's hoping GE is right with his values and our share price gets back up above $9 in the coming year. Lex
JMS: Good point about adding the Bakken to my pipeline variance remark as it appears the metric comparison may well have been premised on Marcellus/Utica acreage alone. Thanks, Lex
How does the author of this note reconcile his numbers? If the shares have 40% upside from $4.70 at time of issue, that takes the share price to $6.40. Then in the next sentence he has a has a target price of $10. I like the $10 more, but taking his asset sale metrics at face value in light of the current PPS, the target appears 50% higher than his implied upside calculation. I trust the difference is explained by the pipeline since the implied upside is premised only on production and acreage.
A takeover is more likely when Ebitdax gets close to equaling or exceeding capex. That is the litmus test because it is at that point that the acquirer doesnt have to issue a bunch of equity or take on debt to fund further expansion -- they just pay a fair price and take on the benefits of self-funded upside. See BEXP and KOG for examples.
HT: While I certainly agree with your overall sentiments, selling the Bakken is a mixed-bag from the perspective of cash flow, which MHR needs so desperately. Remember that our 5000 a day of Bakken generates a royalty-adjusted $400k or so a day in revenue, which is 100,000 mcf a day of dry Utica gas on a sustained basis, or around 60,000 mcf a day with MHRs level of liquids. Yes selling Bakken creates a large liquidity event and helps to focus the business, but revenues will fall dramatically once sold without a lot of new -- and sustained -- production. What MHR really needs is a slew of additional wells on the pipeline to jack up future EBITDA projections so they can monetize the pipeline at a high Ebitda multiple..... Now if THAT happens the shorts will really be scrambling. Just my two cents. Lex
Ht: You comment ..... "until production starts offsetting the debt.' Well, THAT is certainly a long way off since MHRs own estimate for next year's EBITDA( (2015) is $200m and the capex budget is twice that for THIS year with all indications GE is going to have a similar budget for next year. Getting the SW wells on line will help stabilize the price in the near term, but IMO the PPS will not move significantly until either the Bakken acreage is sold or the MLP is announced as until one or both are announced, MHR is bleeding cash with softening liquidity and struggling to bring wells on line in an area with limited surrounding infrastructure. Just my two cents.
You know, one of the MS press releases there was reference to the MLP being "early next year" as opposed to simply in 2015 -- now THAT would be sweet. Get the two large-line interconnect laterals completed and a commitment to complete lines to the three southern Ohio pads (Farley, woodchopper and the other). and then cut EHP loose in an MLP. debt is reduced, liquidity goes up, and infrastructure in place to get all major pad production to market.
Days like today hurt to watch, but I have to admit, I am feeling very optimistic about the next 6 or 7 months.. GL, Lex
Looks like the market thinks we are definitely in Apple, so my concern is probably all for naught. Certainly hope so. As for your reply to my prior note, not selling is not insider trading as there are no trades. Thus, I continue to feel it is odd he sold. BUT it sounds like the GC bought shares so that is good.. One more day...Keep your fingers crossed.
Oligo: Your response makes so sense in explaining the matter I am attempting to focus on. Was the CFO smart to recognize the current value of his past non-salary compensation? Possibly. But why do it if you (a) dont have to do so, while (b) expecting a run up because of Apple? My fear is he doesnt expect a run up because of Apple because he knows the story. And the fact he is willing to sell his most recent shares that do not yet have LTCG tax treatment means he is willing to pay an extra 19.6 percent tax bite on those proceeds just to get out now. Maybe I dont understand your point based on the way you expressed your thoughts, but if your point has anything to do with needing to sell so as to be able to offset what might be phantom income, you still would only sell enough to offset the corresponding number. But he sold ALL his shares. I love INVN but this one factor is something I dont like.
Maybe I missed it, but is anyone aware of what GE offered during his remarks at the conference yesterday?
Obviously, current events and supply/demand metrics drive the short term oil prices, but taking a 30,000 foot look at oil prices generally, it is almost a no-brainer to call a bottom on oil prices at least some time in September. Why? Because if you look at a multi-year price of oil chart since the market downturn in 2009, the price of oil has gone up during the Sept to Nov 30 timeframe 5 out of 6 years. For that reason, I think next Qtr numbers will look pretty solid based on revenues from rising prices.
Cant think that Apple would leave INVN out of iphone, then put in in iwatch, only to turn around and THEN put INVN in the iphone. Doesn't make sense since they announce the two products together. My big fear is that INVN is not in the iphone because the CFO that was replaced sold all his shares -- why would he do this if Apple was coming along? Why not hold at least SOME for another 6 months or so....
Perhaps the best part of the announcement today is GE has a powerful partner for purposes of launching the antipicated MLP in 2015. Somebody to hold him accountable and force his hand and someone who, with Relational, will be pushing hard for progress on all valuation fronts. If GE could only get the SW wells on line and announce other significant well test results...... Today's announcement certainly makes the 2016 leap options more attractive IMO. GLTALongs.
Not really a good or bad thing as it concerns the company; just a notation that someone out there is placing a high contract count, but relatively low cost bet on the PPS rising above $7.15 by October options expiry about 45 days from now.
Cuda: Looks like you are right about the calls being new purchases as the open interest figured jumped this morning based on these call buys being new contracts. I mistakenly thought yesterday's low open interest count applied, whereas it simply was not updated yet for these new call purchases. Sure hope the big bettors that took this position are correct and the PPS is set for a big move upward with the new well production coming on line -- whenever that is.
GE represented it would be 30 days about 40 days ago, and these calls allow for another 45 days for the event to actually happen. Probably about right for "GE time," whose calendar seems to turn over at about half the rate as the rest of our calendars work given his record of events happening when he says they will. Ha!
GL to the longs. Lex