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
Sniffing around the options tables, there appears to be a good looking option spread opportunity shaping up for Feb 2015 between the $5 and $7 calls with current mid-points at $1.75 and $.65. if the PPS drops any further, the mid point pricings may be attainable and you could put together a $5 to $7 spread at a cost of $1.10. Breakeven at $6.10 would be close to 5% below today's price and if the PPS is over $7 come Feb you make $2/$1.10 for a 81% return less commissions. For those of you who think the PPS should be ramping up with new wells coming on line and the reserve report growing substantially, this might be an attractive play with limited risk. Lex
Although this apparently does not impact MHR directly, Zeits has a new Seeking Alpha article out that discusses the monster results of Shell's deep Utica discovery in PA. For those of you paying attention to surrounding area developments, it is an interesting read. Google "deep Utica discovery" if you cannot otherwise find it. Just out this morning. Lex
At the risk of repeating myself, which I will now do, I note that the presentations that Antero puts on its website HAS to make MHR longs feel good about MHRs acreage. Look at slide 4 and see where AR designates the core areas of both the Marcellus and Utica plays and think of MHR's acreage -- either smack dab in the core, or just to the southwest of the core for Farley. In the Marcellus, see slide 22 and note how AR is moving right at MHR's Tyler County WV acreage as the focus of its drilling program. As for the Utica, look at slides 26 and 30 and you see the Farley area is just to the SW of the core highly rich/condensate that AR is focusing on and ARs dry gas Utica acreage is right on top of MHRs in Tyler county. MHR may not be producing like AR yet, but their acreage sure looks to be strongly placed. Lex
This week's Barron's article on INVN suggested an Apple Iphone win was already priced into the share price. If true, the teardown should not have great upside results, but could have significant downside results if INVN is not in the unit. FYI, the Barrons article focused on the release of the iphone, but did not comment on the related potential if INVN finds its way into the iWatch. My concern is simply that if INVN doesn't make the iPhone, I don't think it makes the iWatch either, all of which would not be good for me. Keep your fingers crossed.... Lex
Upton: Sure the democrats did -- they took an uncompromising stance that led to "counter-idiots" like Ted Cruze showing up and actually getting support. This country only functions well when the moderates of both parties realize working together is important. Your democratic boys were in the process of trying to steamroll everyone and Cruze and his idiot friends found a counterattack. Simplistic blame, like you appear to favor as a view toward all republicans, is unreasonable. Once again, you make my point. Later....
Upton???? Seriously??? YOU never debate republicans? You are always debating and taking pot shots at republicans; what a joke for you to claim this. Heck, I have slammed you myself, on multiple occasions, for taking over-the-top liberal views without factual backup for your "spectrum-edge" views and suggesting you simply be more reasonable. I will acknowledge there are the super-right wingers on this board (other's on the spectrum's edge) that deserve a challenge for your super-left leanings, but your arguments always seem to break down when you fail to recognize the rule of reason. Good luck to you, but this post of yours deserved remark as a bunch of hot air.... and I could not resist being the one to call a technical foul on you. Maybe even a bench technical for which two shots are given...
Smile now and have a good weekend. Lex
I am glad to see drilling success, but I thought TPLM's McKenzie county acreage was supposed to be strong. Is it not in the core of the play, or is it TPLM's completion techniques that keeps the well numbers below others like KOG? Any thoughts from those with more familiarity to production activities of the company?
TIA for your input, Lex
If you are comfortable enough to sell January 12.50 puts, I would think you would be better of not buying the jan 12.50 calls, but rather buying the jan $10 calls and SELLing the $12.50 calls against them. Looks like you would get the same $.40 per share credit, but you would also realize a full bull call spread and $2.50 of additional profit at a PPS of $12.50. The PPS would have to go to $15 for you to make the same $2.50 with your two-legged spread. A three-legged play has much less risk and a much higher chance to profit than the two-legged play subject of your note. I don't mean to be critical; I am just pointing out there is a lower risk play out there for most folks to consider.
Just my two cents. Lex
Antero came out with a new presentation today and I just think it could look much better for MHRs acreage position given the content of slides 11, 12, 23, 27, and 30 that appear to suggest that MHR should have great Utica wet acreage around Farley, great Ohio dry Utica Acreage in both Ohio and WV, and good wet Marcellus acreage in WV. Everyplace AR is focusing on is either right on top of MHR acreage or, in the case of Farley, in direct alignment with the play lines (dry/wet/rich/oil) with MHR simply being a bit to the southwest of ARs 1250 mbtu content well drilling. Fantastic stuff.
But then........, AR has slide 14 that quotes a study by Credit Suisse indicating MHR has the highest finding and development costs in the industry. Anyone have knowledge of this? Is the report skewed because we have been drilling Farley and other zones without production or why do we look so bad? TIA for input. Lex
I hope this view of Dentinger being a better CFO for the future based on larger company scale is accurate because Krock was no slouch. He had been CFO at five or six tech companies and he was a Cal Berkley smart guy, so I think the transition is an odd one that is not easily explainable given INVN might be making some big announcements soon and it is odd to see an officer depart a hot company. That said, his salary was not that high notwithstanding his status as second highest salary at INVN and maybe he got a good offer from somewhere else. Or maybe he was tired of stock and option restrictions as officers and wants to cash in on his $5m of related value that he can sell after 90 days.
One odd note I found in looking into this issue a bit is that Krock has not been accumulating shares over the past few years as his insider transaction history shows a regular pattern of exercising 25,000 share option packages that are immediately sold the next day -- not a pattern where he exercises and keeps a post tax obligation segment that he wants to hold long term for LTCGs. Nope he has been exercising and selling all option award share count.
Well, I agree it is all about flexibility, but suggesting the timing is right because of Relational possiblly selling into a rally from where we are now? $6.50 to $7.25 is an 11.5% quick rally. Sell at $7.25 and make a friggin quarter dollar per share? Maybe if there is a GIANT rally, but I don't see that without some really big test results. Maybe that is coming, but if it is coming, why not wait to file in a few weeks when they are in a profit position?
IMO, I think it is damaging to their own interests to file this right now, unless they want out. They got in and found things weren't quite as rosy as expected and maybe, just maybe, they DO want to sell at $7 after buying at $7 and move on.....
I have made some very good returns in oil and gas investing, and I have had some real stinkers as well. One of those was ATPG, which hired a new CEO who got a boatload of shares on the hire, and he resigned a week or so later. He wanted out and he was right to want out as the company went into bankruptcy a few months later. I am not suggesting MHR is going into bankruptcy or anything like that, I am just saying there are circumstances when smart people get into something and then want out because, when they learn additional information, they come to feel they have better opportunities elsewhere and things were not quite as represented going in.
Why not wait until Relational had at least some amount of profits to file? If the PPS were $8 at the time of filing, I would think nothing of it. Just doesn't smell right to me given the timing.
Anyways, here's hoping the board has a nice weekend. Will be interesting to see what happens Monday. Lex
Well, that surely doesn't look good. The selling shareholder is the Relational group who are registering to sell approximately 75 percent of their 32 million shares purchased only several months ago. Maybe this is a common practice for a PIPE investment like Relational made in order to maximize flexibility, but I just don't see how this type of filing so soon after the PIPE purchase, particularly when the share price has dropped, is a good thing as it seems suggestive of Relational "wanting out" rather than being a long term holder. I am interested in hearing what some of the other posters think.... Lex
JD Baker: If I may add a little color to the discussion. Win is spot on about what choke refers to, and I would add it is always expressed as a fraction with 64 as its denominator. Thus, the 28/64 choke in your previous note means the orifice was over 50% closed and was 7/16ths open. In an earlier post Win noted that 24 hour rates are somewhat meaningless and that is true without reference to choke sizes. For example, BEXP used to come out with great sounding initial well results because they kept the choke wide open and allowed max flow for 24 hour results, but that is not good for the reservoir and tends to mess with the sand/proppant in the fracks, so operators have gotten away from that. Indeed, many don't even publish 24 hour rates because they bring the wells on very slowly and don't even have them at sustained flows until day 15 or later -- which is why 30 and 60 day rates are recognized as much more important. Lex