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

To: Spekulatius who wrote (39079)	9/3/2010 12:10:03 PM
From: E_K_S	Read Replies (2) \| Respond to of 78464

RE: Penn West Energy Trust (PWE) - Q2 2010 Investor Update How did you arrive at the BOE(crude) $ price of $15.00 and the BCF (NG) $1.5? According to their 2009 annual report (pg. 22) pennwest.com *Their Netback BOE 2009 price average was $26.32/BOE.* This is net of: royalties - $7.66/boe operating expenses - $14.93/boe transportation - $0.52/boe - Netbacks for 2009 were $26.32 per boe compared to $39.85 per boe in 2008 and $31.51 per boe in 2007. The decline resulted from lower commodity prices for most of 2009. Therefore, one could argue that the $15.00/boe number that you use for crude is too low perhaps by 40%. ============================================================= Here is another way to arrive at the same number. Note: Here is a table of their average selling price per BOE and/or mcf 2009 ($49.43/boe) vs 2008 ($66.60/boe) (pg 10) pennwest.com After subtracting out the per BOE operating expenses, roylties & transportation of $23.11$49.43/boe (from above) from the net average BOE selling price, you arrive at their Netback BOE number of $26.32. ============================================================= Notice that their development cost per BOE have come down substantially from earlier years. - For 2009 proved plus probable finding and development costs, excluding future development capital, were $13.75 per boe (2008 - $18.94, 2007 - $29.43) with a recycle ratio of 1.9 (2008 - 2.1, 2007 - 1.1). This may further be reduced with horizontal "in-fill" drilling technology which is being deployed. The net affect is a better ROI on their Capex spending. -------------------------------------------------------------------- I have not analyzed many of these E&P oil company reports and many of the numbers thrown out like "proved" vs "probable" and BOE expense and production amounts may be incorrect and/or just bad estimates. Why use Enterprise Value (EV) and not Market Cap when comparing under/over BOE valuation analysis? Isn't the market cap value (# of shares outstanding X $price/share) a better indication of what you have to pay for the asset? I do appreciate you review because it allows me to see how others value these types of assets. EKS