Jims. To answer your question about FA.
Fundamentals vary considerably among these 3 AWA others I've worked with and posted about in the past few years.
Some have very little debt, others quite a bit. Some hedge little or none of their production, others are more active hedgers whether it's forward sales, collars, options or a combination of those instruments.
Because I've some field experience drafting sub-surface geological maps to generate prospects (1986 - 1990) in one of the mature Mid-Continent basins, the way I evaluate which E&Ps are worth positioning is a lot more reflective of that background. And different than how most other web posters conceptualize <valuation> of an E&P.
To me such questions as price to CF, price to sales, to book etc are all derived from the geology. Or more specifically, the degree of success the earth science team and management has been able to demonstrate in assembling a large portfolio of of highly prospective acreage and then showing a good record of drilling success that monetizes the acreage into highly profitable production. Understand that and you'll be earlier to the party than the cash flow and other quantitative mavens. But hopefully not too early.<g>
To the extent that I can estimate whether that is present in an E&P I'm DDing? Then, the other more commonly used FA and TA tools come into the picture.
I've posted a little about geology & engineering a few times, over the years. But most people don't have the field background to derive any benefit from that kind of discussion. Naturally they're more interested in brain storming about trend lines, MAs, debt to equity, or CF ratios, etc, etc.
Those, AWA other issues, are certainly important. But FWIW, they come after the geology in my DD.
Isopatch |
