shrewd crude report valuation, page-52

TBE, I'm responding to the original post, which made a claim that a single well is worth $30M. It's probably not worth that, and I simply did the minimum I could to show why. It would disrespect the work in the original post to not give some detail.

In setting a current valuation, I take a very conservative approach. So for today that is to use a 20 cent per MMBTU for confirmed gas resources in the ground, using the low end of similar CSG transactions. If that number is a low end, then if they prove out 3 Tcf of confirmed resource that is $175M market cap ($600M resource value times 29% TBE ownership).

Then, I have to assign probabilities to all outcomes. They might not prove up anything. They might prove up a lesser amount. They might prove up more. Each person assigns there own percentages to the outcomes. But you need to assign some probability to the zero outcome case, because that does affect the valuation significantly.

I agree with you if they find 3 Tcf of gas that can be produced then they are worth more than $70M ($175M is about 2.5x). But $175M isn't my current valuation because I assign non zero probability to lesser outcomes.

Each person can assign their own probabilities of various outcomes. Someone might assign a 90% probability of finding 4 Tcf and value that at 50 cents an MMBTU. That's a ton of market cap. Someone else might only see 25% probability of finding just 2 Tcf and value it at 20 cents per MMBTU.

For the near future I don't see a 10 bagger even if they have great success. But I understand the math that might get another person to 10. What is clear is that institutions have been buying the heck out of the stock and someone sees value.