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MCF - Contango Oil & Gas


ItsAValueTrap

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12 hours ago, decko said:

Do you like the valuation here? or is this just another small energy play that never pans out...

First, MCF is now a part of an enterprise that isn't that small anymore. I don't know enough about Independence's asset base yet to answer the valuation question. I see some things in common with INDT here post merger in that the combined company will have a lower cost of capital than MCF did, and scale it did not have. If this becomes KKR's main energy investment vehicle, it will be able to swing pretty big in a field where I suspect there are some big swings over the next few years.

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The KKR management agreement is very KKR friendly.  $53mm per year management fee plus 1.5% of all equity raised plus 2% of equity in incentives annually.  I think this company is uninvestable for that reason alone, plus I think the assets are uninteresting.  It's a mix of Tier 2 shale assets (from KKR) plus overvalued producing assets (from MCF) with subpar development / reinvestment prospects.  And if you want an income play with commodity leverage, there are better options out there.   

Edited by rosemontseneca
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