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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: wilywilly who wrote (20894)

10/12/2014 8:41:20 PM

From: Steve Felix

1 Recommendation

Recommended By
E_K_S

Read Replies (1) | Respond to of 34328

All jmho, that it is overdone, again. If it wasn't for perception I wouldn't have been able to get it at 9.3%.
Perception of accounting problems drove it to $36 in May 2013.
Perception just 12 days ago was it was worth par, $50.

That MHR has a lot of debt isn't perception, but fact.

Always more risk with high yield, and certainly no guarantees.

On the plus side, insiders were recently buyers of the common in the low 6s. Surely they didn't see this
"anything oil" pullback coming either. Then again, they are more gassy.

They have recently hit what may be the best shale well in the country.

They have also been selling non core assets, raising cash, and have more to go.

They recently set up the sale of 6.5% of their pipeline, giving it a current value of 1 billion, where they will own roughly 50 percent .
They plan to spin it off early to mid year next year, giving them a nice chunk of change.

High yield comes with warts. I better like preferreds where the common pays a dividend, allowing a little
cushion, if only in my mind.

Wheeler Reits WHLRP paying 9.7% here at $23.15. No call date, mandatory convertible @ $7.50 I believe.

Moodys on MHR: moodys.com

Global Credit Research - 08 Oct 2014

"MHR should have adequate liquidity through 2015 which is captured in the SGL-3 rating. Pro forma for term loan issue, the company had $105 million of cash as of June 30, 2014 and has full availability under the revised $50 million revolving credit facility. However, over the next several quarters the company will continue to generate significant negative free cash flow. The company is looking to divest additional non-core assets in North Dakota to raise additional cash. The term loan has no financial covenants but the revolver has two. A maximum total secured net debt to EBITDAX test of 2.5x (stepping down to 2.25x on March 31, 2015 and to 2x on June 30, 2015) and a minimum current ratio test of 1x. We expect the company to remain in compliance with these covenants. We expect limited borrowing base growth this year as organic reserves additions are largely offset by asset sales. We note that MHR's midstream assets (Eureka Hunter) are not pledged to MHR's bank lenders and could provide alternate liquidity. The stable outlook assumes that MHR will maintain adequate liquidity and ramp up production through 2015.

A clear upward trend in production and good liquidity will be pre-requisites for an upgrade. An upgrade could be considered if production can be sustained above 25,000 boe per day and the retained cash flow to debt ratio increases substantially and is maintained above 30%."

( 25,000 boe a day is 20+% below the company's guidance for year end 2014, but in fairness, they have missed numbers before )

This came out the day after the Moodys rating: ( from MHR web site )

Magnum Hunter Resources Announces Definitive Agreement to Sell Certain Non-Core Assets Located in Divide County, North Dakota

Transaction Sales Price of $84.7 Million in Cash Final Closing Scheduled for October 15, 2014

HOUSTON, TX--(Marketwired - Oct 9, 2014) - " Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (NYSE MKT: MHR.PRE) (the "Company" or "Magnum Hunter") announced today that Bakken Hunter, LLC, a wholly-owned subsidiary of the Company, has entered into a definitive agreement to sell certain non-core, non-operated working interests in specific oil and gas properties located in Divide County, North Dakota (the "Properties") to an independent exploration and production company for a total sales price of $84.7 million in cash (before customary sales price adjustments). The purchaser has today made a $4.25 million purchase deposit for the benefit of Bakken Hunter, LLC. The effective date of the sale is August 1, 2014. The Properties to be sold currently account for approximately 720 BOE of average daily production, net to the ownership interest to be sold, and consist of a non-operated working interest in approximately 105,661 gross (12,500 net) leasehold acres.

The final sale is scheduled to close on October 15, 2014, and is subject to customary closing conditions."

Not pounding any tables, just saying the risk/reward fits with me.