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

To: E_K_S who wrote (38937)	8/24/2010 3:34:49 AM
From: Paul Senior	1 Recommendation Respond to of 78748

I'll continue to hold EGN. I'll look at their upcoming presentation to see if I can glean some further information. When I bought this stock, it was because it had a utility component and an unregulated component (the bigger piece). Having the unregulated business justified to me EGN's very low dividend yield compared to other utilities. Although I guess now, comparing its regulated portion to other regulated gas utilities, it's similar (and has "28 years of dividend growth"). I'm looking to buy oil producers. Gas producers, I'm generally staying away from. It's good to see EGN's acquisition is mostly for light oil, and that the bulk of EGN's capital expenditures is going to oil now. Seems like all these companies are going that direction (toward oil, away from gas) if they can. Aside: I'm self-taught in evaluating these e&p companies, I've come to the sector just recently, and I have no real-world business experience regarding. So I feel I've got a lot to learn. Also I worry that I'm on shaky ground in that I may know just enough to get me in a lot of trouble with stock buys here (and not know enough to know when to extricate myself). I cannot seem to evaluate gas in the ground: These conversions to "barrels of oil equivalents" with gas confuse me .... So I ignore this (-g- uh oh!) All this as prelude my analysis of the pending EGN acquisition. Imo, EGN got a most excellent deal. I value the oil component to be worth $310M dollars based on the announced reserves they are acquiring. They paid $185M for the whole kaboodle. EGN says they are a "proven, low cost acquirer" of assets. Perhaps so, but this is a deal which I find so good that that I also find it somewhat unsettling. It may just be me who is using unrealistic multiplier factors to come up with the worth of assets in the ground. Which means since I'm using these metrics elsewhere to make e&p stock buys, then I may very well be buying e&p oil stocks by calculating they're worth a lot more than they actually are (at least to a knowledgeable/strategic acquirer).