re: Ann: Investor Presentation - Euroz Securi...
The sp dump this past week is likely due to the bulk selldown of many junior OZ oilers. And possibly a bit of additional nudging down of RFE by rogue instos (or maybe not).
Patience, I appreciate your views, but a few points seem at odds with the data, so please correct any errors of mine below:
"their reserves are not overly large in respect to their market cap" -- Actually RFE's EV/2P is around 10 or 11, which is somewhat below the 14-15 average for OZ junior oilers. Several analysts (Strachan, Euroz, Bell) have reported these numbers for a dozen firms since mid-2012, with RFE's figures updated to this month (but at above 70 cents, not 63 cents!). Equally important, 80% of RFE's Miss. land has NO reserves attributed, so a huge reserves upside even from drilling a few wells on the unestimated properties.
"the more they will go into cash conservation mode which means less drilling which means less production growth etc" -- Of course, but RFE does have $37 mill cash and more than 1200 boepd (now 1500 boepd?) to generate ongoing cash flow (currently $1.2-$1.5 mill per month). With drilling costs about $3 mill/well, they seem to have enough cash and revenue for about half of their 2013 target production, excluding future revenue growth.
" I would suspect that they are going to be up for renewal cost on some of their acreage soon as they simply can not drill fast enough to retain." -- This is an important concern, but I can't find any info that RFE has lease expiries in 2013. They say their current drilling schedule will hold the land in production, so achieving these wells will avoid any expiries.
But we do agree that getting a (competitively priced) debt facility would ease up the potentially tight financial situation or slowdown in drilling objectives.
RFE Price at posting:
63.0¢ Sentiment: None Disclosure: Held
