MHR and KOG Results

MHR and KOG released Q1 results and had their conference calls:

Riddle me this:  How does a company with a $700 million market cap raise $600 million?  Answer:  Sell some equity and tap the high yield market to replace all the short term money.  Throw on a large acquisition that needed to be financed, increase the oil drilling budget and now longer run the company overly tight liquidity wise and it all comes together.  Operationally MHR had little detail to offer.

KOG does not give out quarterly guidance due to the difficultly of knowing well hookup timing in a lumpy hyper-growth phase.  Production in Q1 was a little light at 10,578 BOE a day.  March production was 12.500 BOE.  Guidance for the year was changed; the upper end of the range of 21,000 BOE was kept the same, but the lower end was lowered to 17,000 BOE.  Again, well timing is key.  The year end exit rate of 27,000 is expected to be met or exceeded.  Anecdotally, they do have a 4 well pad coming online sometime near the end of Q2.  At this point only half of their natural gas is being gathered and sold (vs CLR at 88%).  Almost free money, even at $2 mcf.  Their learning curve remains steep.  They plan to draw down on their revolver over the course of this year and to go the other way in 2013.  Experience suggests they will find some acreage to buy and drill instead.

Sources:  Magnum Hunter Resources and Kodiak Oil and Gas

Update:  My latest Seeking Alpha essay was published:  Plains Exploration and Continental Resources by the Numbers

Getting Creative…

As we navigate trying to understand the investment world, this blog tries to wade through the sludge to improve our understanding.  I post anonymously.  In the spirit of pioneering financial writers from Larry Livingstone to today’s blogosphere, I changed my pen name.  Hello J.J. Butler.  Eighty years ago (pre-SEC!) a real J.J. Butler wrote the booklet Successful Stock Speculation for his brokerage firm.  Enjoy!