The price
of Magnum Hunter Resources (MHR - $0.52)
soared more than 70% to $1.33 per share on August 10 when the Marcellus/Utica NG driller announced
intent to farm-out certain undeveloped and unproved oil and gas leasehold
acreage currently held by a wholly-owned subsidiary.
The
putative deal was to be structured so that cash-starved MHR would receive – in total
– an infusion up to $430 million to co-develop acreage located in the Marcellus
Shale and Utica Shale in Monroe and Washington Counties, Ohio from this
un-named venture capital fund.
Following
the achievement by the fund of the greater of (i) a 12% internal rate of
return on invested capital and (ii) a 1.20x multiple on invested capital, 100%
of the Fund’s working interests in the acreage would automatically revert to
Triad, save for a non-operated working interest of 10% by the fund.
These
days, Magnum Hunter seems to be “growing a tree of falsehood from a small grain
of truth (Polish poet Czeslaw Milovz).”
Similar
to the supposed asset sale of its Eureka Hunter pipeline, this joint venture
looks more like another desperate act of dissimulation by management: the
regulatory filing stated that a definitive agreement would be executed within “the
next 30 to 45 days.”
Editor David J Phillips holds a financial interest in the stock mentioned in this article. The 10Q Detective has a Full Disclosure Policy.
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