AL - multiples and cashflow.
I hope that things work out however the "8"x hope may be a bit rosy?
Look at 3Q revenues and compare that to 3Q cashflow. Look at 9month CF compared to 9month revenues.
Overall there has been an improvement but.....
But?
3Q saw just over 34% of revenues turned into cashflow ($8.83CF/BOE). The 9month figures work out to $5.61CF/BOE or 27.31% of revenues. Combine that with LT Debt (Sept. 30 = $27mil.) and it may be arguable that an "8x" CF multiple would be the "bestest of the bestest" possibilities from a shareholder perspective.
Recently I saw a report done on some intermediates which were in the 5000 to 10,000 boepd tier. The stuff seemed to indicate that on a one-year-forward basis cashflow multiples had a 5 year high of 11.9x and a 5 year low of 3.2x CF multiple. Target assumptions for most of the dozen or so situations being considered used a 5.9xCF Target multiple. Some situations were being pegged at even more conservative targets.
As far as operating costs go URC does appear decent - less than $5/boe. Still, there's that lack of revenue becoming cashflow thing........ also, historically cashflow multiples obtained by intermediates are slightly more than those of junior producers which URC probably sits with.
To apply a 8x cf multiple may be setting a lofty goal.
Somemore examples.
Look at some possible peer companies based on either production or overall cashflow:
- Real Resources RER-tse. 3Q production 1852 boepd, CF of $2.7mil. on $4.2mil Revenues.
- Renata RTA-tse. 3Q production 3,489 boepd, CF of $4.3mil on $7.8mil Revenues.
- Avid AVO.a-ase (hold a position). 3Q production 2804 boepd, CF $3.7mil, $7.2mil Revenues.
- Richland RLP-tse. 3Q production 4027 boepd, CF $4.5mil, $7.4mil Revenues.
Upton's 3Q production 3527 boepd, CF $2.9mil & $8.3mil Revenues would seem to allow plenty of room for improvements?........ maybe I'm missing something. Agree that the future would seem better at first glance and hope turnaround has happened however the thing that keeps nagging is the abysmal record of revenues becoming cashflow. |
