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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: Syncrude who wrote (6101)2/24/1999 10:04:00 PM
From: J. Kerr  Read Replies (2) of 24925
 
I am not sure your questions are directed at me as I spoke only of reserves - not production but I tend to agree with your points. I too find it hard to believe that a net book value upwards of $9.00 per share as of Sept. 30/98 can now turn into a "fair offer" at $1.90. The only answer I can come up with is that this is what happens in today's market when a company's debt/cash flow is over 7x as was the case with REL as of Sept. 30/98.

My valuation example was done very quickly to get a ballpark idea of what this offer looked like. You are correct - I did not allow for value of fixed assets or land as I did not have access to that information at the time. Even at that, I would say that a price of $4.30 Cdn. per boe (for proved and 50% probable) is ultra cheap. There aren't many companies that I know of that can get finding costs down that low and at that value, the share values of most companies would be drastically lower. So if some value is given to REL's fixed assets and land, then the price paid per boe is even lower yet - a real steal for Dominion Energy.

As was mentioned in the previous post, given the US/Cdn $ exchange rate, and today's depressed market, American companies with the financial wherewithal must be licking their lips at the prospect of buying Canadian assets.

Regards.

Joe
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