Should be 81c (at least)

Hi all,

I just thought to have a look at the relative metrics of 2 very similar companies with 2 free carried elephant-type wells in west Africa; FAR and PVD.

The numbers I've used:
FAR (as at 14 April 2014): shares: 2,499.8m; price:$0.048; Mkt Cap $120m; Cash $36.7m (incl $9.57m cash paymt) EV= $83.27m (for 17 April 2014). Best estimates for FAN, Beer and SNE; 304, 632, 154mmbbls respectively for a total of 1,090 mmbbls; FAR 15% share = 163.5mmbbls. ASX energy Index = 13871.
PVD (yesterday): shares = 148.9m; price=$0.48; Mkt cap = $71.5m, cash = $5.5m (after seismic); EV = $66m. Best estimates MZ1 and Toubkal: 1112 and 1168mmbbls respectively. PVD 23% share = 255.8mmbbls without Toubkal and 524mmbbls with it. Energy Index 11851.

I have not made any adjustments for any geological chance of success estimates as these add another subjective/unknown factor.

Based on FAR at-spud metrics, PVD, on an index adjusted EV/'best' pre-drill bbl estimate basis should currently be trading at 81c and that does not take into account the second likely free well, Toubkal which would boost the at spud PVD 'should be' price to $1.66.

Plug the numbers into your spread sheets and see it for yourselves. The mkt has factored in $0 for the second well (Toubkal?) and is discounting the at-spud sp much more heavily than the mkt (if adjusted by the energy index). Mind you, the Index is only off by about 15% since FAR spudded FAN1 on 17 April '14 which is much less than I would have guessed exploration mkt sentiment to have dipped.
Even if we assume mkt sentiment is off 50% (no science here...just arm waving) since then (and include the second well Toubkal) we still get a PVD at-spud price of 82c.

The upside on success? Well, the experience (sceptic) in me strongly doubts we'll ever get another FAR with 2 discoveries, but even if one comes through with, say, 500mmbbls at a conservative A$5/bbl (note Moroccan PSC terms much better than FAR's in Senegal), then PVD's 23% would be equating to a $3.86 share price. And, of course, the professional analysts have much higher success price targets than this.

The simple metrics on this one look very, relatively attractive. Even in this market.

Cheers