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

To: Paul Senior who wrote (39089)	9/3/2010 2:00:21 PM
From: E_K_S	Read Replies (3) \| Respond to of 78464

Hi Paul - E&P valuation models Would it not be better to use a BOE price that is a function of the daily crude oil price? Maybe you just use 25% of the daily Crude oil price that Bloomberg posts on their Web page. Based on today's price $74.00 x .25% = $18.50 EV vs Market Cap The McDep news letter follows the ratio of EV/Market Cap. I guess a ratio of 1 or less is good. mcdep.com Can you explain the difference between EV and the Market Cap (1) What accounts for the large difference between companies? and (2) Why do analysts prefer to use Enterprise Values (EV)? Isn't the goal to determine if the per share value is significantly undervalued based on the "proved" BOE reserves in the ground after allocating specific company BOE operating expenses? It seems to me that an equivalent Mc Dep ratio could be calculated (similar to what the McDep ratio trys to calculate based on the Market Cap & Debt adjusted to Net Present Value) but based only on the company's in-the-ground BOE "proved" reserves and their associate BOE operating costs (ie costs to get the oil from under ground to distribution channels). I would call this the Paul Senior $BOE/share ratio where 1.0 represents fairly valued company BOE in-the-ground reserves when compared to the $ per share price. Anything greater than 1.0 would mean that you receive more $BOE value than you pay per market share price. Then you can simply compare this ratio to all possible candidates and rank them from high to low. The highest number represents the company with the "best value" BOE reserves. EKS

To: Paul Senior who wrote (39089)	9/7/2010 9:49:15 AM
From: E_K_S	Read Replies (1) \| Respond to of 78464

LINN Energy to Acquire Properties in the Wolfberry Trend of the Permian Basin for $352 Million finance.yahoo.com From the article:"... Significant characteristics of the three acquisitions are: * Net production of approximately 3,300 barrels of oil equivalent per day (73 percent oil); * Proved reserves of approximately 30 million barrels of oil equivalent (72 percent oil); * More than 230 Wolfberry drilling locations representing proved undeveloped reserves of 23 million barrels of oil equivalent; and * Reserve life of approximately 25 years..." Was this a very good deal? 30 Million BOE crude /$352 million = $11.73 per "proved" BOE This is less than the conservative $15.00/BOE that has been discussed on this thread. EKS