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To: KaiserSosze who wrote (106312)	1/17/2012 7:42:18 PM
From: Robohogs	Respond to of 118717

Are you really surprised? Look at nat gas prices today? If market starts another correction, we will re-test $5 I assume. Jon

To: KaiserSosze who wrote (106312)	1/18/2012 4:59:00 AM
From: Paul Smith	Respond to of 118717

Jefferries on MHR -- '11 reserves came in roughly 5% above our expectations. Significant q4 reserve growth should result in a positive borrowing base redetermination in the Spring. Added liquidity will help MHR continue to aggressively develop its liquids-rich opportunity set. Reserve growth exceeds expectations. PV10 lags... 2011 proved reserves of 44.9 mmboe exceeded our forecast by 4.7%. Organic reserve growth of 53%, liquids ratio of 48% and PUD ratio of 51% were in-line with our forecasts. However, PV10 of $630.3 million was 20% below our price-adjusted estimate. We had anticipated a more aggressive development scenario than the number implied in the PV10 report. SEC price deck was $96.19/$4.11. Positive borrowing base redetermination expected in the Spring ... proved reserves grew 8 mmboe in q4 driven by 0.9 net Eagle Ford completions, 4 net horizontal Marcellus completions and 18 gross new Bakken wells. Applying a similar 22% bump in 1P reserves to the borrowing base equates to a $35-40 million liquidity increase. The current borrowing base stands at $168 million and had just $70 million drawn as of q3. Well positioned in 2013... the MHR bear case is predicated on a lack of funding to aggressively develop its massive unbooked liquids-rich opportunity set. A preliminary look at '13 shows the company should generate north of $110 million in cash flow, compared to $94 million estimate for 2012. A $40+ million bump in the credit facility would allow the company to at least maintain the current $150 million E&D capex budget. Continued volume growth in '13 coupled with additional upward borrowing base redeterminations should provide sufficient liquidity.