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
Looking at yahoo, it appears the contracts are being bought back by sellers since the open interest number is so low. Sellers of the $7s taking profits rather than risk the PPS jumping up on the announcement of new wells coming on line. In others words a defensive move, not necessarily a bullish one.
(Unless, of course, someone has a different explanation because a lot of time, you just cant tell from info on Yahoo). Lex
Anyone know? TIA for answering.
Not that gutsy because I invested in spreads. I have a 150 contract spread between 5 and 10, and another 150 contract spread between 7 and 10 with average cost of 1.28 so my break even is 6.28 and I started out in the money. I lose money if it trades below $6.28 in Jan 2016; I make about $11k if it trades at 7: and I make $30k per dollar from $7 up to $10 seventeen months from now. $10 or higher and I nearly quadruple my investment. Selling the $10s greatly reduces my risk and cost, which is why I rarely buy calls by themselves. Absent a buyout, I don't see the PPS going ballistic in the next 17 months, but I do think it goes up from here which works for me as I double my investment at $7.60 or so, rather than at $12.60 for folks buying shares now. GL to all the longs. Lex.
Whiteoak: I am a long time MHR holder, but pared my holdings way down since the beginning of this year based largely on GE consistently misrepresenting events, or at least the timing of them, coupled with related concerns involving cash flow. There is no disputing your quoted figures re past operations being very unprofitable, yet that in large part is attributable to significant expansion of acreage coupled with upfront pipeline development costs coupled with depletion and depreciation expenses. When they bring the next few pads on line, production should ramp up quickly and the cash flow situation should improve. But you are right, MHR will need to divest of more assets and wont be profitable for another year or so.
BUT, this IS an asset play, and it IS a grow the company and sell it play, and your analysis/comments don't focus on that. You choose to comment on the 800 mboe figure compared to 78m, when everyone knows both figures are BS given the company's current situation. The Aussie deal aside, GE has put together a tremendous acreage position that he is just starting to drill -- compare Antero and other more-developed companies' investor presentations regarding where the core of the Utica wet gas is, and the core of Utica dry gas, and the core of Marcellus wet gas, and -- lo and behold -- you will find MHR acreage that, coupled with the pipeline, is evidence why the current PPS is too low and ready to rebound. Yes, MHR has failed to deliver timely, but the time for real improvement is coming soon (particularly from this low price) and IMO that is one of the reasons Relational came in with their investment.
In light of the foregoing, I submit you should rethink your position. Just my two cents. I know I have as I recently started buing shares again and I am long 300 Jan 2016 option contracts. Lex