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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Wyätt Gwyön who wrote (14259)5/21/2004 7:16:57 PM
From: russwinter  Read Replies (2) of 110194
 
<already discount $28/4.50.>

It's no longer in the Raymond James archive, but I copied a 12-15-2003 report that discusses market valuations. By and large the prices of the equities in Dec. are not much higher on average than now. I tend to use and be more familiar with names with good North American nat gas exposure over intl majors. RJ says:

"As we have stated previously, we believe E&P companies with average reserve lives should be worth $1.50-$1.75/mcfe in the public markets, assuming only $4.00/mcf in average long term gas prices. Valuations approaching $2.00/mcfe could easily be justified based on long term prices of $5.00/mcf, and $2.50/mcfe in a $6.00/mcf gas environment. Furthermore, E&P stocks have historically traded at 5.0-7.0x forward EBITDA estimates."

Many of the stocks in our sector remain attractively valued. The large cap stocks are currently trading at only $1.41/mcfe of our 2003 proved reserve estimates, and at only 4.7x 2004 Ebitda estimate (based on RJ's $5.50 04 price forecast). The small and mid cap stocks are trading at an average of $1.75/mcfe of reserves and 5.3X EBITDA."

Ultimately I think the stocks to own will be the offshore drillers, as they can really fly, when their pricing leverage improves, which may be imminent.
beacon1.rjf.com

I see about 56,000 contracts were reduced on the spec side of the energy sub-group, so perhaps a sell-off to $34-35 is too aggressive to expect?
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