Too all, I have taken this opportunity to ATTEMPT to roughly value the company in as conservative a manner as possible. I welcome any and all comments - positive or not.
IMO, the gas is the key here.
I keep coming back to PETD, Cabot, ERI, and Statoil -
Lets look at PETD 10K regarding reserves:
(16) Net Proved Oil and Gas Reserves (Unaudited)
The proved reserves of oil and gas of the Company have been estimated
by an independent petroleum engineer, Wright & Company, Inc. at
December 31, 1997 and 1996 and by the Company's petroleum engineers
at December 31, 1995. These reserves have been prepared in
compliance with the Securities and Exchange Commission rules based on
year end prices. An analysis of the change in estimated quantities
of oil and gas reserves, all of which are located within the United
States, is shown below:
Oil (BBLS)
1997 1996 1995
Proved developed and
undeveloped reserves:
Beginning of year 81,000 140,000 79,000
Revisions of previous estimates (27,000) (30,000) 72,000
Beginning of year as revised 54,000 110,000 151,000
Dispositions - (49,000) -
Acquisitions - 27,000 -
Production (9,000) (7,000) (11,000)
End of year 45,000 81,000 140,000
Proved developed reserves:
Beginning of year 81,000 140,000 79,000
End of year 45,000 81,000 140,000
Gas (MCF)
1997 1996 1995
Proved developed and
undeveloped reserves:
Beginning of year 43,312,000 33,829,000 32,225,000
Revisions of previous estimates 875,000 (1,037,000) 686,000
Beginning of year as revised 44,187,000 32,792,000 32,911,000
New discoveries and extensions 2,489,000 2,613,000 2,119,000
Dispositions - (127,000) -
Acquisitions, net of sales
to partnerships 12,377,000 9,529,000 135,000
Production (1,810,000) (1,495,000) (1,336,000)
End of year 57,243,000 43,312,000 33,829,000
Proved developed reserves:
Beginning of year 35,516,000 29,326,000 27,746,000
End of year 42,411,000 35,516,000 29,326,000
(17) Standardized Measure of Discounted Future Net Cash Flows and Changes
Therein Relating to Proved Oil and Gas Reserves (Unaudited)
Summarized in the following table is information for the Company with
respect to the standardized measure of discounted future net cash
flows relating to proved oil and gas reserves. Future cash inflows
are computed by applying year-end prices of oil and gas relating to
the Company's proved reserves to the year-end quantities of those
reserves. Future production, development, site restoration and
abandonment costs are derived based on current costs assuming
continuation of existing economic conditions. Future income tax
expenses are computed by applying the statutory rate in effect at the
end of each year to the future pretax net cash flows, less the tax
basis of the properties and gives effect to permanent differences,
tax credits and allowances related to the properties.
(Continued)
F-19
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31,
1997 1996 1995
Future estimated cash flows $159,618,000 193,800,000 99,478,000
Future estimated production
and development costs (69,265,000) (59,806,000) (29,288,000)
Future estimated income
tax expense (20,781,000) (33,499,000) (20,004,000)
Future net cash flows 69,572,000 100,495,000 50,186,000
10% annual discount for
estimated timing of cash
flows (41,636,000) (66,233,000) (29,126,000)
Standardized measure of
discounted future
estimated net cash flows $ 27,936,000 34,262,000 21,060,000
The following table summarizes the principal sources of change in the
standardized measure of discounted future estimated net cash flows:
Years Ended December 31,
1997 1996 1995
Sales of oil and gas
production, net of
production costs $(4,158,000) (3,711,000) (1,938,000)
Net changes in prices
and production costs (63,573,000) 42,384,000 17,024,000
Extensions, discoveries
and improved recovery,
less related cost 3,705,000 9,659,000 4,609,000
Acquisitions, net of sales
to partnerships 13,299,000 17,775,000 294,000
Development costs incurred
during the period 9,863,000 5,345,000 2,978,000
Revisions of previous
quantity estimates 2,332,000 (2,902,000) 1,700,000
Changes in estimated
income taxes 12,718,000 (13,495,000) (6,054,000)
Accretion of discount 24,597,000 (37,107,000) (8,575,000)
Other (5,109,000) (4,746,000) (3,423,000)
$ (6,326,000) 13,202,000 6,615,000
Now I know we have a different mix of reserves here but just the CBM ALONE is worth $2.75/Mscf or $5,500,000. This is 3.44% of the cashflow of PETD as a whole. At PETD price between $4.00 - $11.00 over the past 52 weeks, this is a price per share between $0.13 to $0.37 JUST ON THE CBM reserves (after production begins but after accounting for development and production costs - as well as cost of money). If the coal reserves estimated by the USGS can be believed, then I have seen enough studies of CBM content of WV coal to believe and actually confirm that this material is here.
I would like to take this one step further and estimate 10 billion scf of gas on these properties (a leap of faith I grant). Now with the CBM we are talking $35,000,000 gross revenue value. This is 22.2% of PETD reserves as a whole. Now we are talking $ 0.88 - $ 2.44 / share after production begins.
This is totally ignoring any oil (probably not much there) and coal (we know that has value and a great deal but then we would have to compare that value against a local coal company - apples to apples.) They MAY add another $ 1.00 / share - I truly do not know as I have not done the analysis.
So I think very conservatively speaking we are looking at a minimum value of the current price (absolute minimum) and a very real and conservative potential of $2.00 - 3.00 / share as we start production. This is just based on what we know to date and my GUESSTIMATE of 10 billion scf natural gas reserves for the original 2600 acres.
Eric |
