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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 670.92

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Nov 7 4:00 PM EST

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To: Johnny Canuck who wrote (51244)	1/23/2015 3:07:14 PM
From: Johnny Canuck	1 Recommendation Recommended By E_K_S Read Replies (1) of 67788

MHR CC Notes: Projecting 100% production increase from existing wells even without new drilling -suspending cap ex spending in January waiting for decrease in cost from oil service companies -expect 50% decline in prices on oil service companies -major of oil lease new so they do not have to renew for 5 years -buying leases at discount right now -expect to be able to make money at $2 gas if they can reduce costs -expect volume increases on Eureka Hunter pipeline -Morgan Stanley Infrastructure funding the major of Eureka cap ex in 2015 -$500 to $700 mill value on Eureka Hunter -expect to be able to monetize Eureka Hunter if MHR requires capital -always paid notes -Enter to $300 mill second lien credit facility that will not mature to 2018 -no concern on borrowing right now -should have no problem with re-evaluation in May as other companies -expect no credit squeeze as a result -have not announced 2015 cap ex budget yet -expect at most $100 mill cap ex , but expect it to be back end loaded on the year -under no obligation to spend money right now -have posted firm letters of credit to have transportation companies move product -can move that letter of credit to bank balance sheet - $30 mill freed up if we do -can sell part of Eureka Hunter if necessary -have no expectation to sell Baken properties because of low cost -hired Morgan Stanley to potentially create a join venture to exploit excess properties -good reaction to this as MHR has good acreage -this will feed Eureka Hunter more if it comes to fruitition -have hedges in place for $4.09 on gas, 30% of production hedged -banks not allowing us to hedge more Questions/Answers: How much will MHR spend on acquisitions? Bought $11 mil on leases due to commitments of mergers. No more large lease purchases. Having to buy little piece to complete exisitng drilling. $20 in 2015 projected. Have spend $11 already. Credit Facilities in Place. Any issues in next year? No financial convents on the second lien only reserve requirements. First lien borrowing on $50 mil. No one can make money at $32 oil. We have walked away from one well that did not make sense. We have no rig or frac crew commitments. Which liquidity solutions would MHR do first? Working hard on the joint venture as it bring cheap capital. Selling 5% to 10% to Eureka can do at anytime if necessary. Timing at spin off for Eureka? Spinning of Eureka should in in Q2. Valuation based on $50 to $60 mil EBITDA could by $1.2 Bill. Eureka has own line of credit. Have $225 mil line of credit if necessary. 13 banks funding the line of credit. 2014 Exit rate? No specifics as an audit is going on. Not far from projections. Total cash outlays of 2015? $600 mil high yield debt - about $80 mil payment $240 mil in line of credit??? at 7% $80 mil fixed payment excluding preferreds. Maximum capacity on Eureka? 1.7 btf's could improve to 2.2 depending on interconnects Bulk of big pipe laying has been done Was can current gas be moved? Firm transportation? Committed to $250 mil of firm but most of that does not kick into 2016. Negotiating about $50 mil of firm at $0.50 an MTF Are you bearish on gas short term. 2016-2017 story? Yes. Not bullish on gas in 2015. Still some winter to go but no idea if we get short term traction. Hedging program? Have changed credit convents so now can hedge 80% of production. Do not want to hedge at $2.90 gas though. Hope for opportunities this year.

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