forecaster
No problem, I was too busy today to finish-up my computations. So, I did it this evening. Seems only fair to subject myself to the same scrutiny that I do others.
My net asset value range is Cdn $6-8 per share. Some will flip, but consider that free cash flow will be directed to debt repayment and capital requirements over the next two to three years. One cannot say they are applying cash flow to repay debt and fund expansion and also use it to value the company.....that is double counting in my books. You need to look out for true "free cash flow", and discount back from that point. Additionally, it is likely that further equity issues will be required, causing some further "dilution". I made some simple assumptions here. My simple computations show about a 7% decline rate for oil, and I have assumed that the gas currently has no commercial value, and if that changes, i would look at revising my estimate upwards. The marketplace is "difficult" to say the least for oil and gas companies. I therefore expect the stock to trade at the low end of my range, or lower. As for oil prices, I derived an estimated differential from WTI, but have assumed that in March OPEC will adjust their production profile and we will see the price of crude revert to its "norm". Long-term price assumption used was $19.50 WTI, its long-term historical average. Short-term, I have WTI drifting down to $19.50. I utilized a 35% cost of equity - I eased off on this from my earlier comment.
So, from todays $4.50 to an estimated $6 - $8, that is a reasonable return in my books. If it jumps past my target, I will reassess, but will likely say goodbye. Management has still much to prove. It would be premature to give value to upside potential that will require capital and expertise that is not yet proven.
I would be happy to discuss my approach if anyone is interested. By the way, the court documents posted by Razor were full of estimates and cost structure information. Some gems in there.
Good luck.
Good idea forecaster. Compliments.
FoxyLoxy |
