PMG has been on a roll for many years now with mostly positive operational updates. Its good to see PMG beginning development/production drilling in the Orito oil field, as Orito holds a good portion, of PMG's oil reserves. My hesitation on PMG, is their 2P NPV lags their discounted cash flow valuation (DCF) / 1P producing reserves. Which means PMG growth is dependant upon growing 1P producing reserves from mostly positive operational updates.
CEN is the opposite of PMG. CEN has lots of 2P reserves. CEN's full value on 2P NPV using $20 /bbl for 2P undeveloped + risked exploration using $20 /bbl is about $25 / share. First Energy is probably discounting the amount of oil in 2P undeveloped and risked exploration prospects, and FS has a $22.50 / share price target. Retail wildcats like us want to use $20 /bbl NPV for all reserves and exploration resources, across the board and the market doesn't.
First Energy and the 2010 51-101 use $20 /bbl for 2P NPV. First Energy uses $20 /bbl for both 1P producing and 2P undeveloped reserves. The 51-101 uses a full field, full valuation pricing model, as if all the oil in the field had been produced. The 51-101, subtracts the full field cash flow from the expenses, which yields $20 /bbl NPV. Currently, market is not providing full valuation for 2P reserves. As CEN moves more 2P reserves into the 1P producing category and the results of operations confirm the $20 NPV, then CEN's share price will move much higher.
If First Energy uses $20 /bbl NPV, for 1P producing and risking exploration resources (undiscovered oil), then First Energy may be discounting the amount of oil, I'm not sure. Typically, all analyst use a discount factor either in the price of oil, or in the amount of oil. Some analyst may discount the value 2P undeveloped 40% over the value of 1P producing. " A bbl in hand is worth two in the bush." First Energy uses $20 /bbl 2P NPV across the board for 1P producing down to risking exploration resources.
PMG and CEN are both good companies, with PMG having a longer history of being fairly valued based on 1P producing oil flows. |
