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

To: Spekulatius who wrote (38858)	8/18/2010 12:04:34 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78652

Oh yes, have to be suspicious of all these companies' npv calculations. As stated previously. Some are done before tax, some are done without excluding working interest of partners, and some weight oil vs gas. With NNN, they say in their recent fact sheet,they have: 1.9 MMB oil proved developed producing, 9.1 MMB oil total proved 14.8 MMB oil proved + probable For discussion, let's ignore "probable" and also the other category of "possible" which the company doesn't mention. From my prior post, I figured NNN.to is a $102M enterprise value company. I know there are lifting costs, royalty or other taxes, and a time value of money (npv stuff). Roughly though, I ask myself, if I could buy the whole company and get 9 million barrels of proved oil for sure, forgetting possible and probable, what would I be willing to pay for the whole company, given that I might be able to sell each barrel of the proven oil that I pull up, for maybe the going-rate, say $75? Okay, each person might have his/her own price per barrel they might be willing to pay. For me, If I paid $25/bbl for 9.1 million barrels of oil, or $227M (which is more than double the current enterprise value) for the company, I figure-- that somewhere between $25 per barrel bought and $75/bbl per barrel sold, there "ought"* to be enough money left after paying the lifting costs per barrel, paying the taxes, and after allowing for the time value of money that it'll take to extract that oil, to leave me with some profit. And icing on the cake, there's still money maybe that could be made from developing the "probable" and "possible" reserves. And they don't have to be "developed" to be valuable: If further exploratory drilling can allow the evaluators to shift some "possible reserves" to "probable", that increases 2pnpv values (if that were of importance to potential stock buyers). *I say "ought", but I don't really know. I'll bet I'm right, but for my typical very small-size position. I'm not so confident that I'd buy the whole company at current price, even if I could afford to. Anyway, this is another way I'm looking at the company -- Perhaps though, I'm just trying a bit too hard to justify my position and my posts. Stock does look good to me though --- one of many I'm buying. And I could be very wrong. Easily if oil prices drop back to lows we've seen in past couple years.