re: Ann: Investor Presentation - Euroz Securi...
Patience, you made the same mistake I did when that reserves report came out. The report is for RFE's Mississippi play only. RFE also has reserves in its OK asset. RFE's total 2P is 20.6 mmboe.
RFE UNDERVALUED ON EV/2P RFE's current EV/2P is about $9.7/boe (EV=$200mill; 2P=20.6 mmboe), whereas the peer average is around $13-$15/boe (below the average means relatively undervalued).
In December 2012 (before the new reserves added), Euroz estimated RFE's EV/2P at $10.61/boe. Last month, I posted two exhibits from July12 and Sept12 with peer comparisons (although getting dated now): http://hotcopper.com.au/post_single.asp?fid=1&tid=1954091&msgid=11441361
RFE UNDERVALUED ON EV/BOEPD But let's also consider production, not just abstract 2P potential. RFE "WAS" pricey last year (before it ramped up production) at $600k/boepd against a peer average of about $320k/boepd. But RFE wasn't much of a producer then.
This week, RFE's EV/boepd is less than $120k/boepd (where EV=$200mill; boepd=1800). NOTE: This estimate uses the standard 6:1 ratio for gas in boepd, whereas revenue value is a better and more commonly used estimate. But RFE's value wouldn't be much higher because 80% is oil.
RFE's "LOW" RESERVES " ~14,000 acres has only 2p of 3.5mmboe attributed to it, they have clearly not drilled to optimise their reserves." Patience, RFE's Mississippi reserves are based on at most 15 wells. RFE isn't an asset developer (prove up and sell). It is mainly a producer, so after initial test wells, it drills to generate revenue. Unless you are a major oiler buying a small firm, you would necessarily have low reserves estimates when first drilling. The key is the success of those wells, which RFE seems to be demonstrating, because their success will result in higher reserves in 6 and 12 months.
RFE Price at posting:
61.5¢ Sentiment: None Disclosure: Held
