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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Night Trader who wrote (160051)	11/20/2011 12:33:03 PM
From: Ed Ajootian	1 Recommendation Respond to of 206121

Night, NiMin Energy (NNN.TO) -- no I haven't seen their report, sorry. I suspect they were worried about all the usual things, such as blowing debt covenants, reserve writedowns due to bumping up against the SEC 5 yr. rule, etc. I'm not too worried about NiMin blowing a debt covenant since I believe their lender realizes that they are worth a lot more alive than dead, and I don't see them having a problem making the interest payments. Some amount of reserve writedown seems inevitable but my thought would be at what point might it be safe to say that that's already baked into the stock price? As of last year-end NiMin's PDP reserves had a PV10 value of $95M (see e.g. presentation slide #19). Since that time oil prices have gone up and they have most certainly increased their PDP reserves significantly, as evidenced by the increase in production that has transpired since the beginning of the year. PDP reserves will hopefully see another healthy bump in the spring once the Ferguson Ranch waterflood proves what it can do. So at this point say they wrote down every barrel of their PUD reserves and, in spite of all this increase in production plus the ramp in oil prices since the end of last year, say they still only were able to get a mere $95M for the PV10 value of their current PDP reserves. This would mean they would be trading at just under a 20% discount to the PV10 value of their PDP reserves. Its absurd to think that NiMin would have to write off every single barrel of their PUDs. Maybe PI can make some sense out of that much of a discount -- if so I take my hat off to them and admit that I just screwed up here big time. This rule says that if you can't demonstrate that you have the financial wherewithal to drill out a PUD location within the next 5 yrs. you have to write it down.