I'll continue to hold GMX to see what they do with their assets.
MHR. Yeah, this one gets a lot of attention on SI, esp. 50% gains thread where many people seem to have made a lot of substantial money on it already. Continual posting on it on SI seems to reinforce its attractiveness and bring in more people. Very little discussion on price vs. value by numbers though. One guy on SI who made a decent effort to analyze the financials got it wrong, imo, by focusing on the earnings statement rather than the balance sheet. (It seems to me acquirers, managements, or analysts generally don't value these dink e&p companies on earnings -- generally because there are no earnings.)
I've looked at MHR's presentation numbers, and here again, it seems to me again a case of no consistency in how e&p's report nav. Perhaps I've missed something, but I read that the company reports only proved reserves and in a very conservative way. Kudos to them, but solely on the numbers it shows, the company isn't undervalued as I see it. However, there are proved AND probable (and possible) reserves, and it seems to me if probable reserves were included (which numbers I do include in my valuation when I see them), the company is undervalued.
Two other aspects: where the company is now, and where it's going. One standard metric for evaluating a producing company is on flowing barrels of oil. (That might include oil equivalents. I'm just going to ignore gas production though, because I haven't yet figured out how to price it. And with the gas glut, all these companies seem to be focusing on oil production.) It seems the number varies that people will have for valuing a "flowing barrel"; I've got my number which I use across all these companies. By that, MHR is overvalued on current production.
Which brings the second aspect: where the company is going. MHR is going to increase, substantially, its production. (more barrels flowing) It has the land and the financing to do this. Management might be capable. Perhaps more significant, the top guy has a history of creating value AND monetizing it to the benefit of all his stockholders (previous company).
I want to say that for me, the land holdings are most significant. Not finding the words now to articulate reasons why...I can't put numbers up to justify any reasons. I'm buying some stuff on valuation (as I view valuation), and I'm also buying more stocks just based on a bet on the land that they have -- that the land contains lots of oil. There are some shales I particularly like that I don't see discussed at all on SI. Some are mentioned very little (Bakken/Three Forks) This "non-discussion" is very positive imo. (If the oil guys on oil threads or people on value threads don't talk about such shales, I assume it's just generally of little interest or generally not yet known, and so early enough to get in and build positions.) Anyway, MHR is in several of the areas I am buying into. So that's a big positive for me about MHR. Otoh, for me, I see other e&p companies that are in the same areas as MHR, which seem to me to be at a cheaper valuation than MHR. Jmo, of course. I'm accumulating a small position in GEOI as one. (Added a little today.) |
