playing defence, page-11

I can see both sides of the story and I have to say that I seem to settle somewhere inbetween the two in my view.

I do agree that Slick Rick's valuation is VERY optimistic, but it's valid nontheless. Those doing no evaluations, why are you in this stock??? If you have your technical reasons, fine. But, if you have no technical reasons and the no evaluation of the fundamentals... I think you're living very, very dangerously.

For the valuation, I think it's fair to assume that we have 20mmbo of oil since they abandoned the production of another well (forget the name now) that has already been drilled and is believed to have 20mmbo of oil in it, for favour of developing JH.

Now, we know that they are going for gas so it's fair to assume that the amount of gas they have is going to bring them more revenue (at least in the short term) than what 20mmbo of oil is.

20 000 000mmbo * $10/barrel * 0.375 (37.5%)
=$75 000 000

Based on the above, if we assume the gas is going to get us at least $75 000 000 and work backwards to get the amount of gas.

$75 000 000 / 0.375 / $3/mcf
= 66 666 666 mcf gas.

Anyone want to do some PV and FPV calculations here? (maybe Uni is useful afterall ;-))

Let's say we value the oil based @ $25/barrel (pretty conservative IMO) - obviously, the company has forecasts of the oil prices staying high long enough for them to get the oil out, or there's enough gas to justify getting it out first if oil prices were to fall.

20 000 000 * $25 * 0.375
=$187 500 000

$187 000 000 / $3 /0.375
=166 222 222 mcf gas


Valuing the oil at $40/barrel..

20 000 000 *$40 * 0.375
=$300 000 000

$300 000 000 / $3 / 0.375
= 266 666 666 mcf gas

What are all these worth to the company?

800 000 000 shares, based on price of 7.5 gives the company a market capitalisation of $60 million.

What is $75 million revenue worth to the company? $187 million? $300 million?

Obviously flow rates are going to play a part in how much a company is going to get out and how much revenue they will earn.

A ROE of about 10% for shareholders would be reasonable. That's about $6 million profit/year (profit=revenues-expenses don't forget). $20 million revenue a year, with 30% of that being profit gives us $6 million profit a year. That's based on the share price @ 7.5c with 800 million shares.