Replies to post #1494 on Oil & Gas - Energy - Commodities - Resources (OILBRENT)

[Timothy Smith]

@Screaming - Interesting in their PR they indicated interest in acquisitions of either E & P or oilfield services. Wonder if it may go down the path of $HIIT.

[Timothy Smith]

$MHR - Bottom Buy IMO - I see this recent action resulting as tremendous upside for $MHR buyers in this range, all in my opinion of course. The incident of course sent the stock into a downward spiral.

MHR remains a fast growing oil and gas exploration and production company with projects in the Eagle Ford and Marcellus Shale areas. While the company has been rapidly growing production, the consistent profits that some investors have hoped for have yet to arrive.

That is primarily because management has been focused on revenue growth. The shorts seem to be focused on this and the fact that the company recently announced it would delay the filing of the annual 10-K report beyond the extended due date of March 18, 2013.

The company said it: "has identified certain material weaknesses in its internal controls over financial reporting in connection with its (I) lack of sufficient qualified personnel to design and manage an effective control environment, (ii) period-end financial reporting processes and (III) share-based compensation. Magnum Hunter has implemented, and continues to implement, measures to address these weaknesses in the future."

These types of issues could create additional risks for investors, however, it is not uncommon for a fast-growing company to experience these kinds of "growing pains". Shorts might be ill-advised to read too much into the lack of consistent profits and the delayed 10-K filing because Magnum Hunter has a management team that includes CEO Gary Evans.

He has a history of producing solid returns for shareholders and his last oil company was acquired by Cimarex Energy (XEC) for approximately $2.2 billion in 2005. Some investors believe he is positioning Magnum Hunter for rapid growth, which could then lead to profits, and possibly the goal of having this company being bought by a larger firm.

If that is the case, shorts have plenty to worry about especially since this stock has made large moves to the upside in the past. If the company files the 10-K with no other issues, investors could view this as a positive upside catalyst. This stock was trading around $4.20 in March but now goes for about $3.30 per share.

According to Shortsqueeze.com, there are about 34.3 million Magnum Hunter shares short. Based on average trading volume of around 4.6 million shares per day, it could take over 7 days worth of volume for shorts to cover. That level of short interest could be enough to trigger a short-squeeze, especially on any better than expected news from the company.

[Timothy Smith]

Utica shale drillers focus on Ohio counties where oil finds look possible

CLEVELAND, Ohio -- More than 150 horizontal wells have been drilled into Ohio's Utica shale, but much is still unknown about the rock formation's energy richness.

The state so far has reported production levels of just nine wells; it expects to release information in April on 50 or 60 more wells drilled last year.

Even with incomplete data, though, producers are zeroing in on a fairly tight section of northeastern Ohio because of two factors: the area's geology and still-low market prices for natural gas.

Industry officials said Thursday that a zone east of Interstate 77 that runs south from Portage County in a crescent shape through western Trumbull, Mahoning and Columbiana counties and into Stark County, could represent the best "oil window," in part because of the shale's depth in those counties.

Peter MacKenzie, vice president of operations at the Ohio Oil & Gas Association, explained that the form of buried hydrocarbons depends in part on how deep it occurs.


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If you started walking east from Columbus, you would be on shale perhaps 1,000 feet underground -- too shallow and cool to hold much in the way of usable deposits. By the Ohio River, the shale is 8,000 feet down and hotter, so hydrocarbons there are "dry" -- and currently low-priced -- natural gas.

Between these geological bookends can be the sweet spot for crude oil and expensive gases such as butane, ethane and propane, which are separated from less valuable methane and liquefied.

Shawn Bennett, spokesman for the industry group Energy in Depth, said that while the east-of-I-77 region looks promising, it will take more "data points" -- core samples from test wells and drilled wells -- to see exactly where the line falls in Ohio between dry gas and pricier wet gas and oil.

"You can have all the data in the world, but until you actually develop that well, you don't know exactly what you're going to get," Bennett said.

The Ohio Department of Natural Resources posted updated maps on its website last week that show all drilling in the Utica formation that's using hydraulic fracturing of wells drilled horizontally into shale to release gas and oil deposits.

As of March 2, energy companies have taken out permits for 295 wells, completed drilling on 155 and have begun drilling on 15 more. Seventy-five wells are producing, according to information collected from the companies.

Department spokeswoman Bethany McCorkle cautioned against reading too much into the maps.

"They're not an indication of where the shale play actually is," she said. "They're an indication of potential."

For example, one of the maps shows total organic carbons found in drill cuttings and core samples. A region in Wyandot County northwest of Columbus lights up as rich with the organic remnants of ancient life that that could indicate crude oil or natural gas.

But organic carbons are only a piece of the puzzle. The carbons also have to be buried deep enough, been exposed to sufficient heat and be mature enough to make for a promising energy reservoir.

The organic material in Wyandot is not very deep and hasn't been "cooked enough" to make it a site of interest to producers, Bennett said.

In fact, wells drilled in Medina and Knox counties had disappointing results, and "everything west of that currently is not going to be an area where you're going to see production," he said.

Natural gas prices have been stuck below $4 per 1,000 cubic feet as supplies are still greater than demand. When drillers swept into Ohio to sign production leases five years ago, prices were above to $13 per 1,000 cubic feet.

The price shift has affected Ohio's shale play. Land leasing and drilling have quieted down, said Dale Arnold, director of energy services at the Ohio Farm Bureau Federation.

But other indicators show that drillers are poised to push harder for natural gas once the market improves.

Seismic testing to determine geologic characteristics is in full swing. Energy companies are negotiating property easements for pipelines to transport natural gas. And demand for drilling permits is brisk, Arnold said.

"We'll probably see an upsurge in oil and gas drilling and production in the next 18 months to two years," he said.

http://www.cleveland.com/business/index.ssf/2013/03/utica_shale_drillers_focus_on.html