To: marcos who wrote (5126 ) 6/2/1998 2:25:00 AM From: Richard Saunders Read Replies (1) | Respond to
marcos/ takeovers....... oh, oh - now that there's some media articles starting to appear I wonder if the "binge" isn't already in the final stages. Sorry, didn't mean to be so cycnical.
Some half-baked bumbles.......(pbd), somewhere at Kerm's Korner there was a few articles posted Monday re: the Tarragon gulp. Can't remember exactly however seem to recall glancing at the equivalent offer price being within a whisker of $30K per flowing barrel of oil equivavlent of daily production. Now this number is probably biased on the upside because Tarragon includes more than flowing production - there's reserves (and some are heavy oil), undeveloped land, drill targets on the shelf and facilities. I'm not sure what the most recent net asset valuation was at - if anyone has a current information that'd be interesting to know.
ANyways, the $30K/flowing number. That seems like quite an expensive number given current pricing in the oilpatch. About a year ago some of the royalty trusts were buying production and that's a type of number where acquisitions began to peak at. Recent qtrly reports seem to indicate that quite a few companies are realizing somewhere in the $14 - $18 range for revenues for a barrel of oil and they seem to be lucky if $8 to $10 is appearing as cashflow per barrel. Now maybe my math is real goofy but $30K divided by $2,920 (365 days x $8) gives the equivalent PRICE/CASH FLOW NUMBER OF over 10. Somebody tell me I'm wrong but to my bumbling way of looking at the picture this wouldn't seem to leave too much room for error. Fire away if I'm spinning.......
Marcos, or anyone else, the article that was linked to mentioned a few names - Summit, Northstar, Crestar, Newport and Rigel.
If someone was real energetic they could whip out the last annual and first qtrly. and do some rough calculations - take the number of fully diluted share and multiply it by today's stock price. That gives you the market capitalization for the stock. Divide that number by current production (or even forecasted production.....) and you're left with a number that represents the current or assumed valuation of a daily flowing barrel of oil.
It would be "interesting" to see where the mentioned names rank in terms of value.
Here's one for starters - Newport Petroleum. disclaimer: Had a position and recently sold it at a loss at $7.25.
Rough and dirty assumptions - approx. $5.50 stock price, around 90mil shares, ballpark 22,000 boepd. The assumptions may not be totally accurate so don't take as gospel but the result is approx. $22,500/boepd.
Try doing the similar exercise with some other situations - (Upton for instance, disclaimer: hold a position; Startech or even Maxx (that's for you Scott Mc. :-) ).
The number that you're going to see on your calculator is going to be quite close to $10K per barrel of daily flowing production.
Question then becomes - "Is a barrel of oil being produced by Tarragon worth twice or almost three times as a barrel of oil coming from some other situation?" I know what my answer is.............
If the answer is "NO" then either Tarragon is too high or some other situations are priced too low or maybe there's reason to argue that there might be some meeting point agreed upon somewhere in the middle. Recent Neutrino acquisition appears to have been done closer, slightly under, $2oK/boepd flowing production. Food for tho't?........... maybe a tangent too.
