on the move, page-22

I'll take you back to my university days.

For those who do not know PE = Price Earnings Ratio.

As DJ1 has expressed above, in this ratio earnings = earnings AFTER tax, not revenue, not profit before tax, not any other flipping variation.

So put simply the equation is:

Market cap / Earnings AFTER tax = PE (as DJ1 stated)

When HOG talks of revenue $4mill per month, that is revenue of $48mill per annum. Lets say costs and tax halve this figure down to $24 mill to give your Earnings part of the equation.

Next you take the Market Cap fully diluted to include escrow so you are looking from a conservative point of view (none of this rosey coloured glasses stuff) from the recent announcement of $142.2mill.

$142.2 / 24 = PE of 5.925

So essentially HOG is on a PE of 6 at the moment as it stands inclusive of shares in escrow. Now Earnings may well be above what i've stated, however at least you know you've now taken the conservative view.

It shows that HOG is probably now trading at about fair value with, as others have stated, the real upside to come from 2nd well and reserve upgrades.

Lets say the 2nd well comes online later this year and earnings increase by another $15 mill conservatively.

$142.2 / 39 = PE of 3.65 meaning if the SP didn't move with that extra earnings the PE then becomes 3.65

Lets say they achieve a PE of 8 with the second well. Rearranging the equation you get:

8 x 39 = $312mill market cap

divide this by fully diluted number of shares (284.4 million) and you get a SP of $1.09

I hope that i've covered everything off correctly and if not feel free to pick at me but hopefully that provides a better understanding then some of the garbage on here recently. HOG is currently at or close to fair value IMO (around the 48-50c mark). Once the 2nd well comes online, some risk is taken out, so a larger PE is granted, and more earnings, so thats where the real upside can be obtained.

Good Luck to all, hope this helps.