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Raymond, I think that it becomes important to try and get these numbers. If we assume $2/barrel for a barrel in the ground as a NPV (which at the going crude of $10, I think is quite generous, considering transportation and extraction costs could easily be $4/barrel, without counting finding costs), and we assume that they will have proven reserves from these activities of a billion barrels (still to be proven, right now, I believe their total proven stand at about 40 Millions), we are talking about a "forecasted" NPV of roughly $400 MM. With about 200 MM shares after conversion, we do not get much more then the current price, meaning the market is pricing HEC relatively fairly and already assumes that a billion barrels will be proven. Of course, all these numbers must be refined, but for a first cut, back of the envelop valuation it is a good start.
Zeev |
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