Yeah I've got a handful of companies that give me cause for...

Yeah I've got a handful of companies that give me cause for concern sround BB redetermination time and one them in quite a large company (but they can get over levered just like small ones).

But lets assume (and that usually ends up biting you) no dramas with BB redetermination. I've taken a look again at SSN against my most popular valuation metrics (so setting aside the debt & balance sheet issues for the moment)

Its obvious from reading this forum that there is much excitement around the breakthrough production of greater than 1,000 boepd. That is a milestone and worthy of recognition. I'm near certain we'll see valuations posted of 1,300boepd x US$100,000 = US$130M ~ 91.5 cps or for AUD about 6.1cps

First thing to say would be that multiple is always EV based - so subtract the debt. Second observation is look hard to find the flowing multiple applicable to your patch. Third is "risk" it by using a range (so maybe $40K - $60K if you think $50K is applicable for Williams Co ND - I don't know). The appropriate production measurement should be FTM average (Forward Twelve Months)

If you make that change, EV is $53M and using midpoint of flowing boped of $50K against 1,050boepd (FTM avg) the valuation is $52.M. On that basis SSN is already priced at the 1,050 boepd production level. Of course if $75,000 boepd is the multiple you feel is appropriate then EV = $78.75M less debt of $17.5M = MC = 61.25M = US$0.43cps (ADR)

Second thing is the EV/EBITDAX multiple. SSN is presently around ~10.6x which is expensive relative to peers - meaning you as a shareholder are paying a premium. Obviously things improve as EBITDAX grows (from a multiple perspective) which is looking purely at the earnings power of the company.

Another that jumps right out is EV/1P. So we have US$53M/1.77Mmboe =$29.94. First thoughts are its expensive but then again only 12% is PUD and its 84% oil so a premium is warranted. You'd have to look for reference transactions but $20/Boe would seem a fair price. This is valuing only the true asset and not the upside that exists in the resource base - but that usually fetches far less than the average punter believes it should.

Numbers come from SSN recent presentation to Enercom.

(Buc since we have compared LNR before, with their 31MmBoe of 1P, FTM production midpoint 5,900boepd and FTM EBITDAX of $90M puts the corresponding ratios at $68K/boepd, EV/EBITDAX of 4.4x and EV/1P at $12.90)

On that basis SSN on the watchlist still.


Now on the production side again, if anyone listened to James's presentation webcast he talked about "Equity Adjusted Production Growth" and looked to above 20% CAGR for a "growth company" valuation. He's obviously trying to normalise out secondary offerings and share buybacks (if share count stays the same then its production growth via the drillbit only)


Rob79 this might be one for you. Look at the last 5 years of Qtrly's and take the reported production for the Qtr and divide by total shares outstanding (use the ADRs). I think if you plot those 20 data points it should give a picture as to how production has grown over time adjusted for equity issued. At least I think it should.