The RAM acquisition looks good, but only if oil prices remain high. TGY will issue 25.6 million shares for the acquisition, giving it a total of 33.3 million shares outstanding. At $5.76 per share, the company will have a market cap of approximately $192 million. As of September 30, the company had 24.3 million barrels of oil equivalents, of which 19.7 million were classified as proven and 4.7 million were classified as probable. At $192 million, the proven reserves are being valued at $9.75 per barrel, which is probably not unreasonable in today’s market. If you add in the probable reserves, the per barrel value drops to $7.90, though I believe that most serious oil and gas investors focus on the proven reserves. If oil prices fall back to the $40.00-$45.00 range, which is probably unlikely, the deal won’t look quite as attractive.
As of September 30, the net present value of the reserves was $552 million, though this calculation was based on an average barrel price in excess of $60.00.
Is your acquaintance still positive on the deal? |
