I agree that the pipeline volume upswing is great, but I just do not understand the press release referring to a possible sale of "less than 8%" interest for $75m. If they said it is 7.5% for $75m (keeping extrapolated value at $1B) it would be bad enough, but "less than 8% creates impression of a possible "down-round" of equity financing which is never good. Moreover, why would a subsequent sale not be an "up-round" where the percentage sold captures MORE value than prior rounds -- particularly when pipeline volumes seem to be exploding. Something doesn't sound right here. Any idea what I am missing that might explain this odd language in today's announcement? Lex
Cuda: I agree with the first paragraph of this post re the balance sheet, but cannot agree with your last statement re premium because the premium we are talking about is relative to a deal done a year ago with significantly lower pipeline values. Moreover, the pipeline is pre-IPO for only another few months. Heck, these two factors are EXACTLY why it makes sense to pay, and for MHR to receive, a premium. Just my two cent reaction to your note. Lex
I own both AR and MHR, so I get presentation updates for both. Sometimes I find myself getting really ticked off that GE's promises and representations do not always pan out. Other times, I am telling myself to just relax, it's all about the end game and the best evidence to support the "relax approach" is a comparison of AR's acreage chart at page 9 of its most recent presentation to MHR's acreage chart on page 15 of its March presentation. We know MHR has super acreage with both Marcellus and Utica potential along Ohio River and in Tyler County WVA, and a lot of good acreage at some other developed pads, but the two wild cards are the western Utica acreage (around Farley) and southern Marcellus in Ritchie County, WVa. These are the two areas where most of MHRs undeveloped acreage still needs to be proven up and I like what the AR acreage chart shows with respect to each. First, Farley acreage is right at the edge of what AR considers the Utica Core and the MHR acreage to the NW of Farley appears within what AR considers the Utica Fairway. And second, turning to Ritchie County, the AR chart shows MHRs acreage right at the edge of the Marcellus Fairway and less than 1/2 the distance across the county from the Marcellus Core.
The bottom line is MHR may not be producing much from either of these big outlier acreage areas, but both of those acreage packages should be strong based on the acreage chart of the largest player in the both areas. So, while I am not happy as we languish here with a low PPS, I think MHR is still a good story for the long term holder. Just my two cents. Lex
Slides 10 and 20 are worth a look for long term MHR investors. Antero is the leader in developing the Appalachian plays and Slide 10 shows it has concentrated acreage in the same counties as MHR as accumulated a lot of its acreage. Moreover, slide 20 ranks the highest return plays throughout the country and 4 of the top 7 are focus areas for Antero involving much of the same acreage as MHR. In combination, the two slides should bode well for MHR and its potential JV partner in the Utica. GLuck to the longs. Lex
I appreciate this is non-core acreage with lease expiration issues, but once again GE sells acreage at the low end (barely) of his projected estimate of value. The "asset value charts" in monthly presentations show Utica and Marcellus values of $10,000 at the low end of the range (Of course, these valuations are all based on sales of acreage back in 2013 and 2014 before price collapses -- but that doesn't stop Gary from using them without adjustment). . Then in his "liquidity initiatives" presentation page, GE claims the value of the anticipated transaction is between $40m and $60m and GE BARELY breaks into the value range with a $40.8m sale and that is pre-adjustments, which may well take the net sale out of the range. $7,800 an acre is probably a lot more than he paid for the acreage, but just another example of GE coming up short on his value estimates. Sorry to see this pattern, but I cannot say it was unexpected. Lex
Cuda: I trust you are right, but barely..... GE survives another quarter.
When is the next liquidity requirement deadline and how much must GE raise to keep MHR afloat? Please let us know if you have the information handy and thsnks in advance for your input. Lex
Hamrick: Agreed. I cannot imagine GE's bargaining leverage being any lower than the past couple days trying to cut this deal with a liquidity deadline only 3 days post closing. Like you, just glad to see the deal get done and hope for better news to come....
MHR press release says unidentified independent oil and gas company with continuous acreage interests. Antero presentations have maps showing operator interests in Tyler County and one of those maps has a small MHR acreage patch next door to Consol/Noble and EQT, so I trust one of these outfits was the likely buyer. Not sure if it makes any difference, although I recall some posters on the board have suggested EQT might be a candidate to buy MHR out entirely.... Just passing along my observation as to who the buyer might be....
Energy Investor and BQdoo:
Confusing? You bet. Apparent double counting by GE? On several levels the best I can tell. First, is the approx 50k of acreage prospective to both Marcellus and Utica. That is acreage where MHR has stacked plays. Second, is the overlap between proved reserves and overstated undeveloped acreage counts. Do me a favor and respond to my argument that the slide 49 figures should have a NAV more like $4.50 a share after adjusting for double counts..
Based on the slide 40 NAV presentation, GE implies that stacked play acreage sells for stacked play value (i.e., should stacked play acreage sell for $20,000 per acre as GE implies with his slide 49 presentation values?), since both acreage counts are accorded full value. Frankly, this appears doubtful to me, but that is one apparent double count.
Second is undeveloped acreage. Slide 11 tells the public the number is 80,500 and slide 49 tells the public it is 166k (over double!!!!).. Take the undeveloped acreage figures from slide 11 (20,368 in M and 60,210 in U), and multiply those values by the assumed low acreage prices in slide 49 (7,500 for M average the U values at 11,250, and the slide 11 undeveloped acreage values total $830m vs the $1.7B figure shown on slide 49 with the only explanation I know for any differential is one set of undeveloped acreage numbers are as of 1.31.15 whereas the other is 12.31.14.
Assume slide 49's 909m value figure for reserves, plus 830m for adjusted undeveloped M and U acreage, plus 120m for other acreage, plus 460m for pipeline/alpha, less 1.4B for debt and preferred, and the adjusted NAV on slide 49 drops to $4.60 a share. And then drop that number by just a dime based on the assumption that double stacked acreage does NOT get full double value, and adjusted slide 49 values drop to $4.50 a share. Please check my math and let me know your reaction. thanks, Lex
One last thought. And sadly, the question then becomes whether the $4.50 value per share figure is too high since it is based on "per acre values" of $7.5k, $10k and $12.5k when those are values taken from acreage purchases made in 2013 and 2014 BEFORE the collapse of commodity prices. Stated otherwise, should the the $4.50 calculation be discounted by another 10 or 20 cents based on overly optimistic assumed acreage values?
I have to admit, I am a loyal long but I have never looked at some of the MHR presentation calculations like this before and I find it disheartening. Lex