Midland MRIX, MRIXZ Message Board

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Gold/Mining/Energy : Midland MRIX, MRIXZ

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To: CKramer who wrote (18)	4/27/1997 11:56:00 PM
From: Ed Ajootian	of 32

C, Their Chalk Mountain partnership gave them a carried interest only in the first well of the prospect. For all other ones they have to pay their working interest share of the drilling. In all of the other pros pects MRIX has to pay for all future wells also. Now that they have had such success maybe they will be able to negotiate better deals on future prospects. But the 38 wells they have planned for the rest of this year are all on their present newly discovered fields. So MRIX needs to come up with 12 extra large, real soon. The company has a breakup value of about $2.75 per share @ 12/31/96 based on the 10KSB, after adjusting their reserve value as reported there for current commodity prices. From there, I figure the wells they have drilled so far plus the wells still to go for the year will total 38, broken out as follows: 13 @ 70 barrels of oil/day (bod) 15 @ 100 bod 10 @ 200 bod They have an average net revenue interest of about 45% on the wells, so if you assume $15 netback per bbl. this group of wells will generate $10.4 mm per year in additional cash flow. The market average multiple is 6, so this gives $62.4 mm additional value to the company. From this we ought to subtract the drilling costs ($12 mm), and this leaves us with $50 mm more net. The $4 warrants are in the money so we need to count them as outstanding shares. But if we do that we should also count the cash that would come in from the exercise (2.2 mm X $4 or $8.8 mm). So the increased value per share is $59 mm or just under $9 per share. Add that to the '96 breakup value and you get an expected year-end '97 value of $11.50 per share. Not too shabby getting a 67% return for sitting in a stock while they do low-risk developmental wells for the next 8 months.

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