You stated: would you have a rule of thumb guide to valuation of gas reserves and/or production?
If so would you care to quantify and put a valuation on gas reserves of RFE.
My response: Many different ways of valuing RFE's gas reserves. All with very different results.
One method is to use recent sales of unconventional gas reserves as a guide. Barclays recently purchased 390bcf (1P) for $1.15billion. This sale price would value RFE's 26bcf (1P) at $76 million just for EOK alone. This is only a very rough guide as it is overly simplistic and doesn't take into account the many variables involved.
Most valuation methods I have used appear to indicate that RFE is undervalued but IMO, the problem with RFE is not it's valuation but more market sentiment, disgruntled shareholders and opportunity costs.
As I mentioned in my earlier post, the outlook for natural gas is not very positive at the moment. It also doesn't help that David Prentice is not very good at investor relations and at communicating his strategy clearly so IMO Low Natural Gas Price + Disgruntled Shareholders + The Perception of Better Opportunities Elsewhere = Poor Share Price Performance.
I do however believe that the gas price will have to increase at some point and when it does, RFE will reward it's patient shareholders very well.
RFE Price at posting:
44.0¢ Sentiment: LT Buy Disclosure: Held
