I haven't undertaken any DCF analysis though a friend of mine who works in Investment Banking (Oil & Gas) advised that i should use $20 to $30 per 2P Reserve as a rule of thumb.
ITC haven't really disclosed their 2P Reserves (and how much is remaining) though i adopted the following:
1. Snatcher (Well 1, 2 and 3) = 576,000 Barrells for ITC
2. Growler = say 560,000 Barrells (40% share of 1.4 million Barrels). When they started in March 08 2P Reserves were 1.8m Barrells. Recently disclosed they have pumped close to 400,000 Barrells (total between JV)
3. Mirage & Ventura = Unknown.
4. Tigercat = Unknown
5. Warhawk = Unknown
Based on the first 2 above the total 2P Reserve estimate is 1.136m Barrells
Based on range of $20 - $30 per Barrell, i derive an Enterprise Value of $22.7m to $34.1m.
We need to factor in 3,4,5 above and this is the Unknown (at least i haven't come across the 2P figure).
The stock has an EV in the order of $38m at the moment.
Once further clarity on 2P Reserves is made the share price will rerate as i suspect (and many here do) that the figure of 1.14m Barrells is too low - lets hope its at leasst a few million Barrells.
Thoughts welcome.
ITC Price at posting:
5.3¢ Sentiment: LT Buy Disclosure: Held
