the fork - how full is the glass.

Now that we have a fair idea of the Forks plans 2009/2010 - I’ve done a roughie EBITDA calc based on how I understand the Fork crew intend to play out the year. I have applied no discount nor is there any provision for admin etc, nor is there any value applied for any further potential (i.e. another 580 wells at EOK and the like). They have no debt and plenty in the bank and will self fund everything they plan to do.

To be clear it is my glass half full assessment, which just helps me get a basic understanding of possible value for my own capital management purposes, so it is IMO and DYOR and apply your own discounts.

Assumptions

• Forecast average oil price 2009/2010 = USD$71.00 per barrel (http://www.eia.doe.gov/steo)
• Forecast average gas price 2009/2010 = USD$5.075 per Mcf (http://www.eia.doe.gov/steo)
• Forecast average exchange rate USD$1.00 = AUD$1.23 (the waterfrontage FX guesstimation)
• Operational drilling targets are contained in previous announcements.
• Production rates for oil and gas is as indicated in announcements as minimum.
• Production cost is as indicated through announcements and independent research notes.
• There will be 100% success rate on drills.
• Production wells are drilled as indicated in announcements
• By end of 2009/2010 Tulsa will have a total of 20 wells @ 2 per month.
• By end of 2009 EOK will have a total of 20 production wells – 10 completed by the end of August.
• Gas from Tulsa and EOK not connected to hub (therefore no revenue) until December 2009.
• Oil from Tulsa sent immediately for sale.
• No ramp down in production in year 1. Would be -8% at EOK in year 2 and am unsure oil ramp down in yr 2 at Tulsa.

By applying the following PE’s to my resultant calculated EBITDA I get the following valuations –

• Current All Ords PE @ 11.29 values RFE at $2.29.
• Current energy sector PE @ 14.03 values RFE at $2.85.
• ORG and Santos have a PE of around 24.5 which when applied to RFE values it at $4.97.

All based on revenues this financial year from what I can determine. RFE is currently trading at a PE of around 6ish which is a multiple receiver managers try to achieve . Clearly 20 wells at Tulsa is huge for RFE, given the oil. The oil makes a hell of a difference.

• I estimate that EOK will generate $733K / month free cash from December on gas sales.
• I estimate that Tulsa will generate $126K free cash this month (on oil) with a linear increase to >$2.6 mill free cash / month (on oil and gas) in June 2010.

In a moment of madness I modelled 600 wells into EOK by August 2009 and got revised valuations of around $16, $20 and $35 respectively at the above PE’s. Sheesh – hardly worth the effort.

RFE now needs to prove up its potential.

You could also come at a valuation from 2P reserves but that’s no fun.

Please note the above is my optimistic view and will not be particularly accurate – and given just to promote discussion - all IMO and DYOR.

Cheers