Mello had to go Despite finding commercial hydrocarbons in all but one prior drill, MM had to go now. MM was not getting it done. If the gas discoveries had been anywhere in Europe or East Asia, we would all be doing a jig. Based on the discovery locations, they unfortunately have a value similar to Canada’s tar sands when WTI was selling for $40 or less a barrel. It is great to know the assets are there, but for now, they are not accretive.
You can speculate about MM’s western gas drilling plan. I have seen several speculative offers, such as HRT had to drill the blocks to meet ANI regulatory requirements, the wells were drilled to define the field, or HRT used the wells to refine their 3D seismic techniques. Frankly, I anticipate that all three are true, but without a pipeline or production facility, one share of HRT and five bucks only gets you some overpriced coffee at Starbucks.
Ultimately, MM had to go because time was not on his side. The BOD is accountable to the shareholders for its management selections. On Friday, the clock struck 12:00, and MM’s time as Cinderella ended as they repossessed his pumpkin carriage. Either MM was in for another year, or the BOD needed to introduce a new leader.
Therefore, we are left to ask whether the BOD made (1) the right decision, (2) a premature decision, or (3) the wrong decision. Based on the fraternal nature of boards, I believe unanimity means this is the right decision at the right time. If we hit pay dirt, then MM was just slow. If we have dusters, new management was not responsible. In either case, IR has something to spin.
GLTA