get forked energy

Hey raja6chandru and others...

RFE with a 136 million dollar market cap,
the first question we need to ask is....

Will the company have future revenue streams large enough, when fully discounted to be able to support a market cap of 136 million dollars through a cash backing...?

I have looked at RFE and straight away the answer to that question is visable without even working through a valuation...
and the answer is NO it wont happen...

First of all...
1) I dont hold RFE stock, nor will I likely...
2) I have researched the stock because many people have been talking about it, I said id look into it, and it has come up on the radar...

so these are my thoughts... that does not mean that you will accept them, but please respect my view and lets handle this in a civilised manor...
some of the recent stocks ive come up against staunch, almost blind like faithful investors... (RFE is different and I will explain)...
some of these other stocks are AKK, GDN, AZZ, and abit WHN... I mainly pop in with my view and run off before I get swarmed... I dont really care much about that... been there done that back with RRS... its not really my style...
but anyway, i'll give you something to think about...

First I will write an overview about US natural gas prices, which are near disaster, and I will make reference of the region...

US natural gas prices are at dangerously low prices...
2.95 per MCF is about 80% lower than it was a year or two back... For the rest of the year and through a part of next year, this is not going to change because production storage is near full capacity and outlook is not expected to improve until both demand kicks in, and supply falls..... further production is coming online over the next few years... supply is going to be backed up to full capacity to the point where there will be no more room for production storage...and the last time I looked (a few weeks bac) there were 56 days of US production as spare capacity.....
Gas is being stored in caveats, and empty wells, and backing up in main pipelines...
I read that full storage capacity is likely to hit November (ish)... Gas prices will likely push lower...
futures traders have signaled this already...

you can do lots of research on this...

and secondly, this is a region thing...
US onshore, Gulf of Mexico (GOM) is a poor poor region to invest in...
land owner back in rights, NRI is reduced when land owners back in...
you still pay 100% costs, but only get back 81%...
picking over fields already picked to bits, declining flow rates, extreme low nat gas prices, even the successful GOM asx oil stocks really struggle...
I can count 33 asx oilers predominately in the US onshore region and theres only 2 or 3 of them that have any real hope...in saying that, RFE would be right up there as one of the better ASX oilers in onshore US...
but your still pissing against the wind on an up hill battle to start with...

The region is summed up well by Peter Strachan...
"struggling to stay still"

... out of the 33 ASX oilers onshore US
here are the ones I can see,
ADI, AVD, AMU, AZZ, AOK, AKK, BCC, BUR, EXR, ELK, EMR, ETE, AUT, GGP, KTE, KOG, LIO, MAE, ODY, PSA, FAR, PYM, QPN, RFE, SAE, SSN, SGY, STX, SUR, SEA, TEX, TXN, WHN...

probably 25 of them wont survive...and FAR has minimal exposure...

So before I have even begun really studying RFE I come to stalling points... these points are VERY valid, because they are supporting foundations of the Region these ASX oilers invest in...
I have been talking about how poor this region is for at least a year now...

The entire region is going to go into decline, and operators will pull out... The market doesnt really know it yet...

Now RFE does look like one of the better ASX stocks in the region... but, when I run my ruler over the company I can easily see that this is not as good as it looks when I read your posts......

First of all,
you may punch those numbers into your calculator and go wow... 1 million per well per year... 2million per well per year... wow...
but, these companies are always cash thirsty because they are looking to expand, so those funds just go straight back into the company...
remember 3 years ago well before the market crash? all these sorts of companies did was raise money when times were good... when times were bad they need abit more money again...

they never, and I mean NEVER get that cash backing to support a lofty market cap for example 136million, because money in reinvested to get more projects off the ground...

declining flow rates are a killer... and workover programs to get desired flow rates (or to sustain flow rates on the declining curve of production come in)
costs of an international business, ie operating outside your home country...

This sort of project that I have seen far too often only works on a large scale, ie hundreds and hundreds of wells... and no ASX oiler has perfected it yet...

but... RFE have extremely low costs... and extremely low drilling costs, completion costs so at the moment while these costs are low there is some glimmor of hope...

so in summary, before ive even gone into detail on RFE... this looks like a poor risk return investment... and even worse for the fact that its run so hard...
I dont know what will happen to the share price over the next few months, 6 months, one year... but the long term picture, and outlook for the company does not look positive...
theres great asx oilers on home turf...
personally I wouldnt even bother with the likes of this one...
just my opinion, I will post more soon...


'^sc