Nsleesman: Are you invested in HK? I think HT might be as well. OT: Do you guys think the PPS is really going to come back over time, or is the debt load simply too much to handle? I have been in and out twice and cant tell if it is really an opportunity or not. The only HK skin I have in the game right now is a sale of 50 $3 naked Jan 2015 puts for $.60 to make back about $3000 of my losses (or own the shares at $2.40). I see HK bounced yesterday. Do you mind sharing your perspective? HT ? Thanks, Lex
I LOVE this board. Within 2 minutes of my taking the time to offer detailed calculations, some bright bulb gives me a thumbs down for my effort. Delicious.....
GE has floated the idea of focusing ops on only the Marcellus and Utica plays, leading us to consider what the value of the Williston acreage is if divested. Given the information provided in the presentations, I calculate the bad half of the acreage to have a GE estimated value of about $160m +/- 15% (since he uses ranges).
How do I get there? GE says we have 152,000 acres in Williston and 50,000 of those are in Canada. Slide 52 appears to state that all Canadian acreage is valued between $87m and $110m (call it $98m) and then has Non-core non-op north Dakota listed as $50m-$75m (call it 62m) or $160m between the two. Looking at acreage, GE has told us we are looking at 50,000 Canadian acres. Thinking the non-core ND acreage to be at the low end of his 3000-5000 value per acre on slide 55, and dividing the $62m midpoint by $3000, my guess is this proposed acreage sale involves approximately 21,000 acres and likely a little more. Thus, my conclusion that the proposed divestitures involve approximately 75,000 or half the Williston acreage.
As for the other half? It is a guessing game, but my guess is the acreage is probably worth north of $525m. I arrive at this figure using the $5000 high value for the roughly 25,000 undeveloped acres not sold as non-core ND acreage ($125m) plus some higher value ($8000 an acre) for the 50,000 proved and developed acreage ($400m) for a total of $525m. Of course, if GE can get 10,000 an acre for proved and producing acreage it would be better, but given my familiarity with Bakken acreage sales as a heavy KOG investor, I suspect 8,000 is likely tops for MHRs acreage.
Please poke holes in my rough estimate, but my rough guess is MHR would make around $500m if it sold its Williston producing and core undeveloped acreage (that is, the acreage not already for sale). Lex
I agree that is what he started out with, but then revised it to a 25% to 40% reduction in borrowing base, so it may be a little lower than 75%. Another related Q and A was that involving current production on the acreage for sale and GE responded indicating it was somewhere around 2000-2500 boepd.
Two other factors with the sale of EFS were (1) higher IRRs in the Marcellus play and (2) EFS was hot and the sale could bring much needed cash fast at a time when needed. While MHR reduced a nice portion of its debt with that sale, my guess is MHR will be adding a fair percentage of that debt back on to get through the next few quarters.
I agree with this assessment as it is clear they are in a liquidity crunch and need help VERY soon. $50m in the bank is not going to go far. Consider 4Q capex as $173m. Reduce 56m for acreage acquisitions and $40m for EHP and you have $77m for regular operations when they told us they were basically shut down for about half the quarter. So expect the $77m to double and the current liquidity is about one month. Current production at 16,700 helps, but they just tool Stalder U well off line for fracking of Stalder M well, so that is not going to help. Beyond that, you have the prediction that 5 net new wells will be on line in the next 60 days, but you know that will likely expand, so there is no giant new source of CF coming in the immediate near term unless the expansion of the revolver is a much bigger figure than I expect it will be since the reserve figures will be offset partially by discontinued production from Burke and waterflood properties sold in the 4th Qtr.
Interesting that he commented on the BOD authority to lower the warrant call price, which makes sense now that we are back under the threshold, but that lowers the proceeds of calling the warrants. While the sale of assets is nice, it takes time and none of the sales will bring in more than $80m, so this company HAS to go to the capital markets shortly. My educated guess after hearing this mornings call is GE will be going to the capital markets within 60 days. Either drop the warrant price to $8 and try to bring in 130m that way, or issue shares. Since issuing shares will reduce the PPS, I would expect the warrant play to happen first. I also think the potential for new price highs on this stock is gone (absent a full sale of Williston) until September as we will have a rocky next six months getting through this liquidity issue while bringing the new production on line. Just my two cents; we will see.... Lex
Don't know if you heard the conference call, but your precise question was asked by one of the analysts and the answer is the $300m listed for sale on the presentation does not include $100m estimated as proceeds if and when they sell their Kentucky acreage that GE said would likely be later in the year "after we see how some of the other sales go."
I did look back and compare the Dec presentation to the Feb presentation and there is not a lot to report. In dec, MHR listed the ND and WV waterfloods together at $75m and they closed on ND for $45m and now show WV waterfloods at 22-25m. What I don't understand is the MH Production $70-$85m available for sale; that is, what acreage is this since it does not include KY?
Sorry, you don't follow my posting history or you would know the specifics I have commented on repeatedly on the bright side including non-company specific matters involving PDCE and AR well locations. So, if you would "prefer" to hear these, just look at my history.
Oakfield: I am a softbasher because I provide a balanced commentary with SPECIFICS on both good and bad? You would prefer moronic hyping and/or moronic bashing like sdfoster? Would that be simpler for you to follow?
The future story looks very, very bright, but the 4th Qtr results were even lower than I expected. Moreover, the release finally provided "unadjusted" production numbers and they were not good. On Jan8, I suggested fourth qtr production would be 15,000 a day high, but likely 13,000 or lower, and the real number? 11,298. I suggested yearly production would be 13,000 to 15,000 a day average (pretty much right on target with the adjusted production number of 14,800 a day), but the unadjusted number, that GE always hides via presentation footnotes, was only 9,845 a day. How do you consistently report "adjusted" numbers when the real numbers are 5000 a day less???? Obviously, weather and pipeline delays hurt the company, but these numbers are simply worse than I expected, so I am a bit bummed out.
And what is the story with Farley 3 not even being drilled yet? Last year we heard time after time how great things were going to happen in short time periods, and this press release tells us a LOT of great things are going to happen by mid-summer. I just hope this time around GEs announcements are more accurate than last year prognostications. We need the Ormet line to be finished and the Collins/Spencer equipment issues to be resolved to get the ball rolling.... Lex
dgt: good job on the double down, and thanks for the kind note. Although certainly not always correct in my views, I do attempt to make a conscious effort to contribute meaningfully to the board, and truly attempt to keep BS notes to a minimum. I note this because I feel exactly like you; there are posters that regularly make intelligent points or offer information from different perspectives (career) or sources (articles or other boards PDCE, AR, GPOR), and I look to and want to hear their perspective.
I LOVE it when someone disagrees with my view with a thoughtful perspective, because that is how we amateur, but sincerely interested investors, raise the accuracy of our continued interest in investing or not investing in a company. Don't mean to be on a soapbox, but your note made me want to express my appreciation to the other contributing posters who provide information or insights in an intelligent and respectful form. I am pretty confident you know who you are, even when -- like dgt -- you are more of an intelligent lurking type. Thanks for your contributions to my understanding of MHR and its potential. Lex
Thanks to each of you for weighing in with some thoughtful remarks. I agree that moving up in time an announcement of potential bad news makes little sense. And yes, I agree with the proposition that the educated posters all know there are reasons why the 4qtr numbers are not going to look rosy. (sp?)
I guess I am just bothered by the fact or oddity that the last 15 minutes involved such a sell off. As I said, maybe some of the longs took the press release wrong, but these were generally big block sales, so I am inclined to discount that being the case. And if there was potential for big positive news, wouldn't the short sellers be buying heavily into the close? Causing the PPS to rise quickly at the end of day, rather than falling?
It was just a very odd confluence of events. BUT, we will know something Monday early, wont we? Have a good weekend. Lex
Senor Beard: Looking at the charts of gild and jazz, it appears you had an exceptional year. Congrats! But 85% in two holdings, and both in the same general sector? Given the fantastic run up in those two holdings, I might consider ADDING to your BBEP holdings for a little diversification, a nice yield, and some lower volatility. Notwithstanding my thorough understanding of the benefits of asset class diversification, along with concurrent diversification within asset classes, I remain a big fan of concentrated investing. But you have taken that concept to the extreme.
You certainly don't need a lecture from me, but I have personally witnessed a number of situations where investors increase there concentration while their gainers climb in value -- that is increasing focus beyond the natural percentage shift growth when good investments are increasing in price -- only to have a significant portion of their gains wiped out quickly, so -- just a simple word of caution -- be careful with that "85% thing you have going on." Good luck to you and forgive me for being so presumptuous to comment on your portfolio without knowing more of your situation. Lex
A new 52 week high and first time back over $21 since last Feb 6 of 2013. Hopefully, the gradual run up in PPS over the past few days is attributable to good news coming out during next Thursday's conference call (and not just because oil prices have hit $100 again). Knock on wood, hopefully we get some good earnings announced, have a pick up in share price and an upgrade or two, and then get another offering to further delever announced and behind us -- at a much higher price than the last one. Go longs..... Lex
Rat: You hit the nail on the head; I am so sick of hearing Welbie cry about all of Kadenstorm's aliases and all the other abusive ad hominem insults hurled back and forth every day. It truly is senseless and it has ruined the board. Heck, it is hard to read any analysis any more as half the posters are on ignore. Have a good weekend. Your trips sound wonderful. Lex
Wow. How about the last two hours of trading? The PPS is rocking along above $9 and the Feb $9 calls are in the money, then poof. GE comes out with an announcement re the conference call at 2:49 eST and then the selling ramps up big time with nearly 1 million shares traded in the last 15 minutes. Were the market makers manipulating the options expiry numbers, or was GE trying to limit sellers with marginal 4Q numbers to come out on Monday morning, or was GE trying to screw the shorts with a last minute change of plans in announcing something good that some holders took the wrong way, or what????? (I doubt there is a big positive coming because, if there were any leaks of a truly positive story, the buying would have picked up vs selling against a declining price)
Most of the time option expiry moves are "non-events" come the following Monday, but the sell off and announcement here may be something altogether different. I have to admit I don't feel good about it because I don't feel good about any of the 4Q numbers as I think production for the Q is going to suck, revenues will be low generally but bettered by increasing prices, but the increased prices will lead to non-cash mark to market derivative losses, and there may be some year end write downs associated with properties sold. Yahoo consensus is a .21 loss, but I fear a much bigger number.
I sure as H hope I am wrong and, like HT has accurately noted in pushing back on some of my prior posts, the long term picture is really looking good,..... but Monday morning might be ugly absent some good news on Farley 2 and 3. Here's wishing all the longs a nice weekend. Lex
Odd that today's volume is not that high (50% of usual) and yet price declined rapidly. I was thinking it had something to do with options expiry since the $9s have been in close play the last few days, but maybe it was the adjustment to the conference call schedule.
I don't know about the last few posters thinking it will be good news on Monday. I hope you are right, but I think it is going to be a double edged message -- with fourth quarter results looking bad, but current operational info looking great. The operational story is already "out there" with the Stalder press release, but there have been NO financial press releases since early November and those were misleading given the footnote explanations that production rates INCLUDED volumes held off line due to plant and pipeline issues.
I WANT the info to be good, but am concerned. Here's hoping that all my concerns about the 4th qtr figures will be washed away with some new and spectacular announcement that Farley 2 and 3 have been tested and have great results. Good luck to the longs. Lex
FYI, here is what PDCE said in yesterday's conference call about its Utica developments in the near vicinity of the Farley well:
"Let me give an update on the Utica project. Currently we're drilling our 14th well in Eastern Ohio, on a 3-well Palmer pad in the southern portion of our acreage position. 11 wells were drilled and online year-end 2013 at a rate of 5,200 barrels of oil equivalent per day. Currently, we're experiencing fairly stabilized production as we continue to hold back pressure on the wells within the condensate window. Overall, we're extremely pleased with the production levels from this project. Expect very strong production growth over the next several months as 2 additional Garvin wells and a 3-well Palmer pad are scheduled to come online. A little more detail on the Garvin wells. We announced the 1H several months ago. We have 2 offsets to this, the 2H and the 3H. The completions, or fracs, are done on both these laterals. One is a 4,800-foot lateral, the second is a 6,800-foot lateral and we executed 58 stages combined for the 2 laterals. We anticipate first sales on both these wells over the next 30 days as we will rest 1 well 15 days and the second well for 30 days. ... "
Although the Neill well has not performed very well and flowback has resulted in a lot of frac fluid, sounds like PDCE has strong expectations for the next two Garvin wells and the three palmer wells, which should help prove up MHRs acreage. . --Lex
I looked at PDCE's presentation again, and the other wells being drilled are the Palmer 1, 2 and 3 wells which are located just west of the Noble county western border, whereas the Crooked Tree pad is just east of the same country border and probably within 2 miles of one another. My guess is when the Palmer wells are tested, GE is going to know precisely what potential the Crooked Tree pad will have for MHR.
Looks like PDCE had a great quarterly report, but most of the news focuses on the Wattenberg. If you are listening, let us know what is said re Utica wells. The last I heard, they had Garvin 2 and 3 along with the Neill and one other well drilled and waiting on completion and hookup. Given their location, I don't know if any will tell us much about the Farley or Wood Chopper pads, but the results should give some useful insights re the potential of MHRs crooked tree pad.