It's all about the assets to me and the fact they have a bank behind them. The bank will take them a long way; until they get an asset sale, or NG turns up finally.
Here is info from an article on value of a few of their assets-
Regarding undeveloped land value, on Oct 16 he estimated the value at 53% to 76% of MHR’s estimate of $1.846 billion. Using mid-point 64.5%, his estimate for land was $1,190,670,000 at that time. Allowing for market deterioration as he suggested, Natgas closed at $1.98 today and is down 18% since the Oct 16 price of $2.43, leaving land value $976,349,400 ($1,190,670,000 – $214,320,600), based on 18% decline in natgas.
And he states on Oct 16, “The reserves plus land would need to be valued at over $800 million to cover the debt plus accrued interest plus around $100 million in DIP financing.” Based on the above figures, the value of the land alone reaches $800 million without accounting for any reserves.
On Oct 16, the SA writer also stated, “Allowing for some additional depletion during the year, plus the weak state of the market might result in an actual valuation of $250 million for the reserves." Well the reserves still carry some value.
And even if natgas declines more, Magnum is guaranteed $2.66 for 80,000 MMBtu per day this year. And Magnum states, “Target rolling 50% hedging program one to two years forward – will hedge further opportunistically."
The banks have run the numbers and granted an additional loan. They know Magnum's value and current circumstances regarding the O&G industry. |
