Hegco Canada Inc. Message Board

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Gold/Mining/Energy : Hegco Canada Inc.

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To: READE SMITH who wrote (2269)	3/28/2001 10:15:22 PM
From: Ed Ajootian	Read Replies (2) of 2316

Reade, Share price as a multiple of sales is of limited use in valuing O&G stocks. What is infinitely more useful is share price as a multiple of cash flow. I'm estimating they are currently producing cash flow of around C$3 - 4 million a year. This works out to around C$.08 per share, or a 6 multiple. This is reasonable (if not a tad high) given the huge upside of the company. It sounds like you talk with the co. management a lot. When you talk next, you should encourage them to break out their production data by amount of oil vs. gas. This would allow us to project the impact of future commodity price swings on them. Also, it would be interesting to know why their production costs are running at $2/mcf, which is double the industry standard.

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