A few years ago, an oil and gas analyst at Patersons Securities by the name of Alexis Clark did some research in which he calculated the lease acreage valuation of several US based oil stocks, including ETE.
In the past I have found this bit of research quite useful, and so I like to keep tabs on it. This research note was previously on the Entek website, but as it was out of date it is no longer available on the website (the Receptionist in the Perth office was fortunately able to dig it out when I enquired about it.)
In early 2013, Clark calculated the Enterprise value of each company and divided this by the total lease acreage position of each stock, thereby calculating the Australian dollar value of each acre of land controlled by the company. I've included Clark's findings from 2013 in the table below, with each dollar-per-acre value rounded to the nearest $50.
Company
$EV/Acre
1
Red Fork Energy (RFE)
$3200
2
Austex Oil (AOK)
$2000
3
Austin Exploration (AKK)
$1300
4
Sundance Energy (SEA)
$1000
5
Samson Oil & Gas (SSN)
$750
6
Entek Energy (ETE)
$500
The company identified by Clark as the most expensive based on the acreage position was Red Fork Energy (RFE). Red Fork is also the only of these companies that is no longer listed: this debt-laden company was an early victim of the 2014 oil price crash.
Entek was the stock he identified as cheapest using this methodology, hence he gave a 'Buy' rating to Entek.
With the benefit of hindsight, it doesn't look like such a great call, thanks to the oil price crash. But Entek shareholders are at least better off than the Red Fork shareholders.
Anyway, I thought it would be interesting to do an update on the dollar-per-acre value of the land held by the surviving companies.
So I have basically used the same method as Clark a few years ago, based on the current acreage positions and enterprise value for each company. To replace Red Fork, I've included one new company, American Patriot Oil (which is fair enough given that the MD of this company, Alexis Clark, wrote the original research back when he was an analyst).
Company
$EV/Acre
1
American Patriot Oil & Gas (AOW)
$425
2
Austex Oil (AOK)
$2370
3
Austin Exploration (AKK)
$250
4
Sundance Energy (SEA)
$5300
5
Samson Oil & Gas (SSN)
$700
6
Entek Energy (ETE)
$20
There could be a few small errors in my calculations in a few places although overall I am fairly confident that the figures are pretty close to the mark.
By my calculations, the acreage that Entek controls is currently valued at less than $20 AUD per acre. The next cheapest is Austin, at $250 per acre.
Austin is a producer, unlike Entek, so that might explain some of the disparity between these two. But American Patriot isn't a producer, and the dollar-per-acre value of their position has been hovering between $400-$500, based on the AOW share price in recent weeks.
Basically, the current Entek share price seems to be assuming Entek's leasehold position is pretty much worthless. I might be missing something, but I have difficulty believing that there is any real logic behind the extent of the disparity in the valuations between Entek and the other US based oil and gas stocks mentioned above.
