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Gold/Mining/Energy : Oil Sands and Related Stocks
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To: Bread Upon The Water who wrote (9862)5/14/2006 3:22:52 PM
From: was Michelangelo7  Read Replies (1) of 25575
 
Back to PBG:
Having read the patents and background for THAI and CAPRI, I can't see why they would not work, but because the current market price of PBG is below my view of the value of Whitesands alone (even if SAGD were to be used) this is still a no-brainer investment.

PBG suffers from the "conglomerate" or "closed end mutual fund" discount. In today's market most people want "pure plays" and pay up for them, but presented with multiple plays within the same company they tend to discount the ones they're not interested in -- in some cases totally -- but only the positives. Any hint of a negative (such as a delay) from any of those discounted operations results in an undiscounted penalty to the perceived overall value. I'll repeat my view of the market's valuation of PBG from a month ago with updated numbers:

Value of Whitesands leases (with additions) is in the $30 range. This of course is assuming SAGD will be used. No value is assigned for THAI/CAPRI since it's not proven. No value is assigned for Canadian and Columbian conventional assets, even though they are producing and ramping up.

But hey... what if THAI doesn't work (and is delayed another month)? Lets deduct about $7 just to be safe.

But hey... what if they don't drill as many wells in Canada as hoped? Lets deduct another $2 just to be safe.

But hey... what if they're still having trouble with 1 well in Columbia? Lets deduct another dollar just to be safe.

Voilla! (sp) we arrive at our current price of just under $20. So you see, the market is very methodical and rational when evaluating PBG!

BTW, re the patent protection issue, even if THAI/CAPRI were to be used only on the Whitesands lease with its reduced cost/enhanced production/upgraded product advantages it would a least double its value on a DCF basis. imo

m7
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