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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: bc who wrote (4668)2/15/1998 6:37:00 AM
From: Kerm Yerman  Read Replies (1) of 24920
 
Steve / Rio Alto Exploration - continued

Here is a company that has grown natural gas production at a good rate; 129 mmcf in 95, 165 mmcf/d in 96, 215 mmcf/d (est) in 97, 275 mmcf/d (est) for 98 and 325 mmcf/d (est) for 99.

The estimates used are to be considered conservative. In the recent 3rd quarter report, the company said they would average 300 mmcf/d in 98. This would mean the estimate for 99 should be adjested upward also.

Most cash flow numbers I've seen would indicate the company should come in around $1.90/share for 1997. I am using the estimates of $2.35 for 98 and $2.80 for 99 at this point in time. I think applying a multiple of 6X 1998 CF and 6.5X 1999 CF is reasonable for determining where the share price is going. I used a higher multiple for 1999 due to premium I believe the market will build into the price due to extra pipeline capacity being realized that year. The market should favor natural gas producers in that period of time.

As far as where their operations are and etc., you can pick up on that with the report I sent you. In addition, their recent acquisition detail as to properties must also be identified. They should also be divesting themselves of properties also.

Hope this helps you to get started in your review of the company.



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