Baseline Oil & Gas (BOGA) -- This was great news, it looks like they have now cracked the code on drilling out these PUDs in the Blessing field. The first one they tried, which was drilled late last year, only did something like 500 mcfd I believe.
So now that they have worked their way up the learning curve, I like this stock more now at $.50 than I did at $.35 before this news.
The valuation remains quite compelling. YE '07 pre-tax PV10 value of proved reserves of $284 M, with $115 M of senior debt. Let's assume the price at which the convertible debt is convertible does not get reset from its current $.73, that means there are 103 M shares out FD, not including options & warrants. Using that figure for shares it means their enterprise value is a mere $167M, which is absurd for a company with $284 M of proved reserves with a lot of probable reservse also. According to their latest presentation, they have 42 BCFE of probable reserves, which had a PV10 value of $146 M at YE '07.
I believe the convertible debt's conversion price will not get reset because all they need to do in order to prevent that result, between now and mid-November, is get the stock price up another 32% or so. Considering they are planning to drill 5 more wells in the Blessing field, if each one of those comes on at anything close to the rate that the E. Blessing #4 did, this should be an easy task. |
