MGM Energy Corp MGMCF

No new information

[OilEng]

I have no new information on MGM, Husky or the MVP.  One of the frustrating thing about this play is the extreme reluctance of the companies involved to tell us very much.  The reason is that this play is controlled by the very large companies and they have a "need to know" policy.  They are only required to release information that is material to their stock price.  One or two wells and a couple of million dollars in not material. 

In other plays like the Duvernay, Bakken, Eagle Ford , etc.  there are lots of small companies eager to promote their stock.  As a result, we get lots of information and excitement.  The good news is that this has made MGM a sleeper which I believe is dramatically undervalued as a result.  If MGM was in the Duvernay, I would not be buying.  Not because the Duvernay is not a great play, but because it is likely to be dramatically under valued because there is so much attention paid to this play.  It is really hard to find undervalued companies in areas under the spot light.  The Canol is definitely not in the spot light.

My feelings is that in order to justify the large risks associated with junior oils you need returns much greater than a double.  In addition to exploration risk the junior are typically undercapitalized, in weak equity market fund with debt and are sensitive to commodity prices.  Layer in the fact that most have relatively inexperience managment at the helm and you end up with a lot of train wrecks.  I am generalizing here and I know there are some companies which are exceptions, but those tend to be the darlings of the investment community and fully priced.