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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Goldberry who wrote (4166)	11/18/1997 11:53:00 AM
From: Kerm Yerman	Read Replies (1) \| Respond to of 24933

Graham / Crestar Energy How low is low. I believe there is very minimum downside at current share prices. Shares are selling at deep discount to net asset value. Shares are weak based upon poor exploritory drilling thus far this year. In the financial end, earnings are terrible. Debt is 2.5X cash flow due to Grad & Walker acquisition. Cash flow should be in the neighborhood of $6.00 for this year, less than 4X share price. Their reputation is that they are good at doing acquisitions, not so good at the drill bit. They have invested a hugh amount into this year's drilling program and it appears as though much is riding on it, especially over the current and coming quarter. Crestar is a value play based upon assets and cash flow. Thus, they are a very strong buyout candidate. If they were to be bought out, shares would demand a pretty good premium over current price - my guess is somewhere north of 22%. On the other hand, I anticipate a strong 1998 related to both operations and financial reporting. Purchase of shares at this time is feasable when factoring downside risk vs upside potential. Remember, just one man's opinion -- this time it was mine.

To: Goldberry who wrote (4166)	11/18/1997 12:09:00 PM
From: SofaSpud	Read Replies (1) \| Respond to of 24933

Graham / Crestar I've just switched from Imperial to Crestar. To echo Kerm's comments, I see Crestar as undervalued. That's not to say that the company is a racehorse -- I think the Q3 results were poor. Look at the success rate on exploration drilling -- don't have it in front of me, but I recall it was in the area of 45%. Plus earnings, as Kerm mentioned. So they hardly deserve a premium multiple with their current performance. But -- with the current share price, the company has got to be a takeover candidate. Whatever their performance, there are assets there, including a land position that has got to make people salivate given today's land costs. If you were to value a daily boe of production at $20,000 (which I think might be a bit conservative in the current acquisition environment), the back of my envelope says Crestar's 90,000 boe/d 1997 exit target would yield a share price on the order of $35. What's the downside? Well, the shares could languish in the low $20 range for quite a while, so it might be a couple of years before you see any return. But I don't see any real threat to the company's viability -- debt is high, but not ridiculous -- and if they can do $4-$5 in cash flow, they can finance some exploration. If you can be patient, I see Crestar as an opportunity. JMHO. I would invite anyone to PLEASE poke holes in my argument, as I have put quite a bit of money where my mouth is.