Any prudent buyer will look at what Marion are producing (which is virtually nothing)and then offer a price on what the revenue stream is(which is also virtually nothing). They would ask Marion Management how much they have invested in building the business, there reply would be close to $100 million dollars, but unfortunately WE HAVE NO REVENUE OR FLOW RATES from all our hard work. They have laid about 20 miles of pipeline, standard price for this is $50,000 a mile in the USA which = about $1 million for their pipeline. $5 -$7million in equipment (maximum) Totaling $8million in infrastructure The rest, a crazy $90 million (plus) on operating costs, including salaries and administration costs. So this management team has burnt $90 million dollars in 3 years - averaging $30 million per year. * Please note: in my previous post I totaled Marion has spent $78 million, but for the above figure of close to $100 million I have added the options take up of $11.25 million in April 07 and a private placement of $3.87 million in Feb 06. And we have nothing to show for it except a IRR which is less than what it was over 2 years ago. MARION CANNOT HIDE THESE PAINFUL FACTS, TO A FUTURE BUYER. let's be honest here, Companies want to buy Proved/Developed/Producing reserves which in the US they call PDP reserves. Marion's 139Bcf of 1P only ticks the first of these three categories - it's obviously not developed properly and not producing. Also don't get excited by Marion having a 'total potential recoverable resourse from its non-producing resovoirs of between 2.4 and 4.3 Tcf' because a potential buyer will pay nothing for gas that is 'maybe there but maybe not'. And although gas prices are on the improve this will not help Marion whatsoever, because it doesn't change the asset or their track record.
MAE Price at posting:
38.5¢ Sentiment: None Disclosure: Held
