MAE 0.00% 0.0¢ marion energy limited

a few thoughts on mae

  1. 1,755 Posts.
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    Being new to MAE, I've just gone through all the asx announcements + broker reports etc since 2006 to get a feel for the company, and these are the conclusions I came up with.

    I have no doubt the company's mission statement would read something along the lines of.."to enhance the value of the assets to get the best takeover price possible"

    the directors own a lot of shares
    the biggest holder only owns 5%
    company presentations emphasise the recent M&A activity along with gas price increases (even though they had little revenue as per last financials)
    MAE directors seem to have their own agenda, and don't try to appease the shareholders.
    Many posters on HC have mentioned the MD stating this objective, though I have not read any comments by him confirming this.

    If the above is true, the company doesn't need to worry about keeping the shareholders happy, there are no big holders & they'll all get nice returns when they sell the assets or get taken over. As long as they have the cash available they'll beef up the 2p reserves as quickly as possible, selling gas would only be to finance further drilling etc to enhance reserves. They are certainly not interested in paying dividends!

    For example:
    selling the Texas assets to increase their holdings in CC and Helper, thus increasing their reserves. Short term Texas was going no where due to rig scarcity, long term it was probably worth hanging on to.

    If you look at the dramatic price rise from 68c on 22nd May 07 to the all time high of $1.84 on 25th June, barely 1 month later, you can see that the reserve upgrade released on that date was obviously leaked to the market (no other announcements were made in that period despite an asx speeding ticket, there wasn't even much speculation on HC so probably not a result of daytrader frenzy)- perhaps they were hoping to sell the assets then, but circumstances delayed their plans eg the rockies gas price, the flow rates at Helper (see below) + other delays to getting the CC wells in production. Correct me if I'm wrong but I don't even remember reading about the commissioning of the reserve upgrade, but looking at the volume traded - a lot of people knew - the price was ramped by someone.

    I'd guess the directors are aiming to sell the company rather than just sell some assets, if CC is the 'jewel", they wouldn't have bothered increasing their interest in Helper, they'd have drilled a few more holes in CC with the money spent to get some gas flow income which the shareholders so desperately want. I get the impression they are trying to build up the 2p reserves at the expense of selling the gas, ie setting the company up for a takeover.

    As many on HC have commented, the reporting by MAE is dismal, but I get the impression the reporting is just aimed at achieving the above mentioned objectives.

    Below I have given an example or MAE's "selective" reporting

    when the 1st well at helper flowed they reported 4mmcf/day, then the 2nd at 2mmcf/day, that was back in August 2006.
    The next mention of the helper well flow rates was in Oct 2006 when 5 wells were now drilled at Helper, but no mention of flow rates of the next 3 wells.

    The 1st indication that all was not as reported at helper was in the Jan 2007 2Q report. CC had now become the "jewel" and Helper production had been "restricted..." but would be solved. (note historical flow rates were way below the previously reported 2-4 mmcf)
    It wasn't till July 2007 in the 4Q report that the flow rates for helper were reported at 200mcf a day (ie 5% of the previous 4mmcf) and no mention of rates since - other to say they're increasing. If remedial action got it to 200mcf, what must it have dropped to before this? and how long did they know before reporting it? !!

    Because of the above I can see why the current sp is where it is. Only initial flow rates for CC have been mentioned and we know the history of reported initial flow rates compared with down the track rates at Helper.

    Having said that, the rates they are getting at Helper now are in line with historical flow rates and CC reported rates are in line with historical rates. I'm new to oil/gas shares but I assume Helper is unconventional CBM whereas CC is conventional which usually have higher rates and less problems?

    Having said all the above, I hold MAE and have been buying more, I figure that if the directors look after themselves, I'll go along for the ride and be looked after as well. Remember the last run before the reserve upgrade, I think the same will happen again. No one will pay $4 a share when the current sp is 70c, they could successfully takeover MAE at say $1.50 today, so the Directors will need to ramp the price as per last june in order to get the prices other companies have paid on a 2p basis.

    Is it risky to invest in? All specs are risky, MAE dropped with the general market collapse and those with no earnings were hardest hit. Investors are tired of managements time frames that are never met. The sp is obviously manipulated, always that $500 automated sell throughout the day, then look at today - on 2 occasions someone bought 1 share to push the price from 70.5 to 72.5c where it closed.

    One last thing, I'd like to thank Freida for her? invaluable research, hopefully you'll be paid off handsomely for your investment.

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