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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: ItsAllCyclical who wrote (60733)	2/22/2000 7:31:00 PM
From: ItsAllCyclical	Respond to of 95453

Ratios used for E&P valuation (Market cap per BOE) Someone on the VPI board was using this calculation on E&P's to determine worth. Basically what would it cost to buy a company's PROVEN reserves. Current share price____________$14.31 Market Value of Equity_________$893 million Add: LT Debt as of 12/31/99____$583 million Total Market Cap.______________$1,476 million 12/31/99 Proven Reserves_______486 MMBOE Total Market Cap. per BOE______$3.04 From the same poster... At the end of 1998 the average Total Market Cap./BOE for the group was $6.42. Reasonable, considering that crude oil was selling for about $11/bbl at the end of 1998. Copy of link messages.yahoo.com I guess I'm wondering how valid this is. I ran the same calculations and came up with PXD = $4.10 OEI = $7.10 UPR = $.93 CFE (reserves quotes in CFE vs BOE) It does point to how dirt cheap the E&P's are as a group and how disconnected they are from reality. Obviously this calculation does not reflect management, unproven reserves, the potential for a large find, stability (location and longevity) of reserves, hedges, cash flows and crude/gas weighting. I guess I'm wondering: 1) To what extent is this ratio used by analysts/funds? 2) Is VPI at $14 really "cheaper" than PXD at 7.5? I still plan on using cash flows, earnings, price to sales, debt levels, crude/gas weighting, trading patterns among other things before making a buy decision. I guess I'm just wondering if I should add this ratio to my list. I don't think this is the best ratio to compare two companies, but it is a good ratio to determine an overall floor of where an E&P's should trade at the bare minimum.