Donald / Crestar Energy
Browse thru past 30 or so postings and you will find comments about Crestar Energy and references to previous reviews.
Permit me to address your "not to cheap" based upon cash flow comment.
The most recent report I've read forecasts 1997 cash flow of $5.64 and 1998 cash flow of $6.51. These figures are on a fully diluted share basis. These numbers result in P/CFPS multiples of 4.6X 1997 and 4.0X 1998. These statistics are low and based upon the growth forecast, shares can be considered cheap.
Let me expand upon these numbers and provide some comparisons, all based upon fully diluted shares outstanding. Among the integrated and senior oils, (19 of them) the 1997 cash flow multiple of 4.6X ranks as the lowest. The cash flow multiple for 1998 of 4.0X also ranks the lowest. The average cash flow multiples for 1997 are 8.5X for the integrated oils and 6.2X for the senior producers. For 1998, average cash flow multiples are 8.1X for the Integrated Oils and 5.3 for the senior producers.
Looking at earnings per share, the picture changes. Crestar ranks in the middle of the pack for 1997 at an P/E estimate of 29.4X which incidently is the average for all senior oils. Same placement applies to 1998 with P/E estimate at 29.3X versus a peer average of 29.9X.
Most Canadian houses have listed Crestar as a strong buy or in the outperfom category. Most 12 month price objectives are in the $35.00 neighbrhood. Briefly, let me mention NAV (net asset value). The year ending 1996 NAV was pegged around $25.00 (I'm ballparking this number - but know I'm not to far off the mark). With the Grad & Walker acquisition, most analysts feel current NAV is around $29.00. Bottom line here is that shares are selling at a discount to net asset value.
I hope this info helps paint a clearer picture related to current value of Crestar Energy shares. In closing out this subject, let me mention that I believe Crestar has a sensational drilling program going for 1997. I like to compare it to Alberta Energy's program which is about the same size program to extent of number and type wells to be drilled this year. Alberta Energy is twice the market cap of Crestar Energy. I also feel that projected 1998 production will be impacted more favorably, thus generating more cash flow than most currently project. A successful drilling program will also impact reserves, thus impacting the NAV. Last observation - net debt is probably the factor holding down share price which is 2.6X 1997 cash flow. Average debt to 1997 cash flow for senior producers is 2.1X. I see Crestar's debt ratio decreasing to the average of senior producers in 1998.
You mentioned Petro-Canada. Shares are the cheapest among the integrated's in comparison of cash flow per share statistics for 1997 & 1998. On the other hand, they are the most expensive in terms of earniongs per share. Most analysts have 12 month price targets in area of $28.00. In terms of percentage increase, upside of current share value doesn't anount to much. However, as Hibernia comes more into play, outlook will impact shares. That's still some time down the road.
Regarding the company operating in Tennesee - that's a completely different investment environment from all other companies you mentioned. As for me, I wouldn't touch it. Based upon what you outlined, investment into this type situation isn't for you also.
If you would like further comment, just ask - I'm sure I and others could help you out. As I always remind the person I'm addressing, please keep in mind that my comments are just one man's opinion -- this time it was mine.
For those of you reading this message, I'm addressing questions Don asked at Kerms Korner. As a reminder, let me please request that people refrain from posting there. Your cooperation would be greatly appreciated. |
