Hello #hottakenation! For your #hottakeover-your-commute, I just have "this":
I really can't stay (Baby it's not cold outside) My reserves got to go away (EQT it's not cold outside)This week has been (Been hoping that Laredo refi’d in) So very nice (That new Encana name is like ice) My mother will start to worry (BlackRock says what's your hurry?) My Varde will be pacing the floor (Lilis bears equity owners roar)Well maybe just a half a drink more (Natural gas records a low on while I pour)
Because baby it’s not cold outside.
Transcript:
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David Ramsden-Wood owns the copyright in and to all content in and transcripts of the #hottakeoftheday podcasts, with all rights reserved, as well as his right of publicity.
Episode #7: #hottakeover your commute transcript
And what is up #hottake nation, it is DRW here coming to you live from… actually, I'm not not coming to you live; I want to always say that. But you know really we tape this and then we put out there, so it's kinda not that exciting, BUT, what I can tell you is NOT up and where we're going to start your #hottakeover-your-commute this week is natural gas falling below two dollars an MCF on Friday in what can only be described as a brutal punching to the face constantly for all natural gas producers. It is ugly, it is getting uglier, and if this doesn't get a colder winter we're going to have gas prices as I said on my what-to-expect in 2020 podcast you could see gas prices in the dollar fifty to dollar seventy five range. It was a great week for us to visit with Chris Kalnin, and I had to reconsider my natural gas bear thesis, in particular that perhaps my bear thesis is "maybe natural gas long-term is the right play". In fact, I know that it is the right play. The question is when. And what I know in the interim is that if you are a publicly traded company who produces natural gas as a primary and you're having to keep rigs up to fill your firm transport commitments, this is going to be a horrific year.
And speaking of, let's start with EQT this week. EQT came out earlier with a reserve revision. They expect a $1.4B to $1.8B dollar charge in Q4, reflecting what can only be described as a beatdown in natural gas prices. Everyone knows because we had a LOT information on it this week. I use SMOG, and not that it was a full SMOG disclosure coming out of EQT, but they did drop - if I go to my handy-dandy spreadsheet - they did drop their SMOG value from 11.6 billion dollars at the end of 2018 to $8.6 billion at the end of 2019, which impacts about half the value of that netted debt, so twenty five dollars per share in 2018 headed down to fourteen that doesn't include G&A, that doesn't include interest, that doesn't include the balance sheet, that doesn't include the fact that gas is currently two dollars an MCF. It is UGLY if you are natural gas producer. Man, I just… the punches just keep on coming.
But… let's pivot to the second topic of the week, the first real take-under that we've seen. Now, you might be wondering what is a take under. Well, if you check the news you would have seen that Lilis Energy had its primary shareholder Varde make an offer to buy the outstanding remaining shares that they don't own; they have a big pref position in that company, they have some debt that they that they own in that company, and they have some common equity that they own and they offer twenty five cents a share and at the time, Lilis was trading north of forty cents a share. Now, let's break that down: When I look at their balance sheet they have around four hundred twenty two million dollars worth of debt pref or prepaid Revenue from a...
