Power of Collectivity, page-12

Nice to see some active conversation on the PYM boards and not just me posting to myself!

I have been doing a bit more digging into asset valuations for O&G companies and found this:

http://www.srr.com/assets/pdf/oil-and-gas-company-valuations-business-valuation-review.pdf

It shows that typical metrics to determine the enterprise value of an O&G project are:

2.5x to 3.0x EBITDA; or
10x – 12x proved reserves; or
45,000x – 60,000x daily production.

Seems too premature to use the EBITDA multiple until we have a full year of earnings with our existing wells, whilst we cannot apply the proved reserves metric until we get the reserves report in the half-yearly report.

If we apply the daily production metric to current net production (25 boe Four Rivers, 100 boe Capitola), this implies an EV of $5.5m to $8.1m, or 1.3c to 1.6c per share (including $6m cash).

If we can double existing Capitola production from the next two wells (to 200 boe), this implies an EV of $10.1M to $14.6M or 1.7c to 2.2c per share ($1m less cash for drilling Fox).

I asked the question a few days back about the potential SP impact from having a proved reserves report – ie. whether we become a more attractive investment after quantifying our reserves.  

My research suggests that this will be the case, in much the same way that other resource companies become more attractive/certain after publishing a JORC.