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Gold/Mining/Energy : mxp (mesa Inc)

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To: Bryan Arnold who wrote (287)	4/20/1997 8:56:00 AM
From: George Mc Geary	of 394

Bryan, Some information I picked up from a broker late last week. This is before the Greenhill deal was announced. websmart.stocksmart.com:8810/ss-news/CX420882.html Pioneer expects cash flow for '97 to be $550M for the combined operations of MXP & PDP. Pioneer will have 73M shares outstanding. The broker tried to tell me that the trading range should be near Enron @ 8.25 or Burlington Resources @ 9.0 cash flow, but I feel more comfortable with industry averages @ 4 - 7 X. The figures look like this. $550/73M = $7.53 cash/share. X 4 = 30 1/8 X 5 = 37 5/8 X 6 = 45 1/2 X 7 = 52 3/4 If you use $600M which would include $25M in savings from combining the two companies and a projected (broker) increase in cash flow the numbers look like this. $600M/73M = $8.22 cash/share. X 4 = 32 7/8 X 5 = 41 X 6 = 49 1/4 X 7 = 57 1/2 This would tend to lead me to believe that the market value of Pioneer at the end of the year might be around $40. (Kind of a middle of the road approach.) Of course the broker feels it will be $70, hope he is right. The broker suggested that I sell my MXP common for he feels that the stock will set where it is until PDP reaches 33 1/3. After that point he feels that the stocks will rise in tandem. Again the 7/1 ratio. Tried to convince me that there was an additional 9% to be made from these levels if I would switch. There may be but feel I will stick where I am no need to generate more commissions on this deal. Will be interesting to watch Raintree on Wall Street Week Friday and see if there is any mention of MXP. Not sure but, believe the program is repeated again on either Saturday or Sunday for those of you who can not catch it on Friday Night. Just thought you might like to know.

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