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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grantcw who wrote (37420)	4/17/2010 12:37:01 AM
From: Paul Senior	1 Recommendation Read Replies (2) \| Respond to of 78750

ATPG still among my favorite oil stocks, and one of my largest individual positions. I'm still adding, albeit very small amounts right now. I may add even more. I am still researching how I want to or should value e&p companies. I'm looking for a number, something to calculate that's quick, easy, consistent - something I can use for a screen and something that sets up a bar -- above the number, it's a value; below the number it's a pass. I've got information on how acquirers use reported data to analyze value. There are three aspects I don't understand or am not comfortable with: valuing flowing mmboe, valuing undeveloped land, valuing oil and valuing gas. What I AM using now is NAV. It's a number that's based on somebody's opinion (an independent company's independent analyst, presumably) on what proved and probable reserves are. This number changes every year -- for gas stocks, it may be going up with new drilling techniques (horizontal drilling), and it changes depending on prices and estimates of oil vs. gas (vs. condensates?). And by whose rules apply: gov't saying use average prices during year vs. prices last day of year. Apparently, my issues or lack of comprehension aside, NAV is a standard measure that some analysts do like. What surprises me is that in reviewing couple dozen e&p companies, maybe only a majority of them provide nav numbers; and fewer talk about it as a key metric. Perhaps it's like insurance companies, where not all managers talk about book value as being a key metric for them. Whereas in their sector, book value performance is key for me, and for many pro value investors. Anyway, I don't know that the companies that do report nav, report it on the same basis. So that comparisons across companies may or may not be valid. The "standard" number I'm using is something called "2p npv 10". (aside: or labeled differently, but the same numerical result) And where I can find that number for a company, I'm putting the number over the company's enterprise value. Where that ratio exceeds 1, I'm saying the company's nav exceeds its stock value and as a consequence, the stock is a buy. Rightly or wrongly. And wherever I find such companies, I am a buyer. I have mentioned several here previously that I've bought. They are dink companies generally, and my bets are small. Because ATPG is both a decent size (imo) e&p company and has such a large $nav number to enterprise $value number --- the largest ratio I've found-- and because ATPG is moving to mostly or more to oil vs, gas (and I like oil for demand/supply pricing vs. nat gas which may be in glut), and because there's so much hoopla about ATPG's bringing up oil - transformational amounts of it compared to ATPG's size and previous production - from new oil operations (rigs) - I've made a significant (for me) bet on ATPG.