Area51, GMXR & TRGL -- they are an apple & an orange, its really tough to compare. Also, the Yahoo EV #'s are often way off, and are so in TRGL's case.
The after-tax SEC PV10 Value of TRGL's reserves was $63 M at 12/31, which values them at $4.63/bbl. or $.77/mcfe. I believe its correct to use an after-tax # in their case because their French NOL was only $2 M and I believe its likely that they will become cash taxpayer there soon with all this production about to come online over there. I have been meaning to call the company to see if my logic is right but haven't gotten around to it.
TRGL has around 12 M shs. out fully diluted. I don't believe any adjustment to the EV for excess cash should be made, they have a huge tax bill due shortly thanks to their property sale in January and thus they have little excess working capital. So if you just take the 12 M shares times a $7.80 stock price you get about a $94 M market cap. This substantially exceeds the SEC PV10 value of their year-end reserves, and it well should --- they are about to drill a well (in the Black Sea) that is gunning for 120 BCF of gas net to their interest.
With GMX, if you are referring to "free cash flow" (i.e. discretionary cash flow less cap ex) then what you said is right, but I believe a better measure for a company is just discretionary cash flow (i.e. cash flow from ops. before working capital changes). I believe this # will be quite robust for this company as of the end of the year, with all the wells that they and their partner PVA will have drilled and hopefully gotten into production. But I haven't even bothered to calculate that figure, I believe whatever it is, it will relate to the valuation that you would get on an NAV basis. And $.80/mcfe for US natty reserves is unheard of these days.
For comparison, GMX had a pre-tax SEC PV10 valuation of their 12/31 reserves of about $1.30/mcfe. I believe its appropriate to use pre-tax for them vs. after tax because they have a pretty large NOL carryforward and they are gonna spend a huge amount of money in excess of their cash flow this year, which will generate a huge tax deduction for the intangible drilling costs for the year. Thus its unlikely that GMX would be a cash taxpayer for quite awhile.
GMX of course does not have nearly the upside of TRGL, so you would not expect it to trade much over its SEC PV10 value of its reserves. In fact probably some sorta discount is required until they can get more production going. But right now its almost a 40% discount, which I believe is too harsh.
Given that the mix of GMXR's proven reserves will weigh more on the PDs vs. PUDs next year, I believe they would garner an SEC PV10 value of closer to $1.50/mcfe next year even if natty prices remained unchanged year-to-year. So then we would be comparing this $.80 figure to a $1.50 figure, even more rediculous a discount.
Have a great weekend! |
