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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (45265)	11/1/2011 11:23:52 PM
From: E_K_S	Read Replies (1) \| Respond to of 78476

Paul - It's based on a valuation of $325M for their Midstream business (125M shares outstanding in MHR common). They already turned down $125M and when it becomes operational (1st phase) in Q1 2012 or Q2 2012, the market value in my estimate s/d be $400M. When they complete phase 2 (basically increasing capacity and adding more processing/ NG compression liquids) CEO Evans stated that the "plant" would be worth close to $1B. I also remember a 3rd party might purchase all the interests in the processing facility and the gathering business (w/ gathering contracts) would be operated by a newly formed MLP spun off to MHR shareholders. Therefore the complete operation may be a bit less if the compression plant is not included (MHR may keep a 50% interest but controls the combined plant to help him secure long term NG gathering end user contracts - smart deal). Either way lots a value is being created in this business that I do not believe is factored in the stock at the present price of $4.30/share. As time moves closer to Phase I operation (w/ no JV deal to dilute the value of the asset), the more MHR common creates value. As you know many of these NG gathers in the form of MLPs have performed quite well since 2009. The early NG gathers in the shale fields are already at capacity and the very large operators are scrambling to buy out the small players (take note of the recent big pipeline deals EP buyout etc.). MHR is set to be a large player in the Utica Shale NG gathering and processing. I am anxious to get my MLP units from MHR. These units may be the eventual "golden egg". Could be worth more than the E&P side of the business in the long run. Therefore, I believe my $3.00/share valuation is conservative. FWIW I have made five buys in 2011 in MHR; from prices ranging from $2.74/share to $4.88/share. I made one sale at $5.00/share early in the year selling a covered call. It's my number one holding in my E&P basket at 25%. SSN is my number two holding at 18.35% and VOG is #3 at 10.52%. EKS

To: Paul Senior who wrote (45265)	11/2/2011 2:36:51 PM
From: E_K_S	Respond to of 78476

Enterprise and Chesapeake Enter into Agreement to Transport Ethane from the Marcellus/Utica Shale to Gulf Coast finance.yahoo.com From the article:"...Enterprise Products Partners L.P. (NYSE: EPD - News) and Chesapeake Energy Corporation (NYSE: CHK - News) today announced they have entered into a long-term contract whereby Chesapeake would anchor Enterprise’s proposed long-haul ethane pipeline from the Marcellus and Utica shale regions in Pennsylvania, West Virginia and Ohio to the U.S. Gulf Coast. The approximately 1,230-mile pipeline would have an initial capacity of 125,000 barrels per day of ethane and could be quickly expanded through a combination of additional pumping horsepower and pipeline looping. *The committed shipper transportation rate would range between 14.5 cents per gallon and 15.5 cents per gallon.* Through connections at the partnership’s natural gas liquids (“NGL”) storage complex in Mont Belvieu, Texas, ethane production from the Marcellus and Utica shales would ultimately have direct or indirect access to every ethylene plant in the U.S. The pipeline could begin commercial operations in the first quarter of 2014...." ============================================================================ I wonder if MHR's gathering system and processing plant output will eventually feed into EPD's pipeline? That's a pretty good rate for moving the product 1,230 miles. EKS