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Microcap & Penny Stocks : MTEI - Mountain Energy - No BASHING Allowed -- Ignore unavailable to you. Want to Upgrade?

To: Little Engine who wrote (3924)	6/27/1998 12:28:00 AM
From: Cliff Daniel	Read Replies (1) \| Respond to of 11684

Hmm. It was my impression that the book value comes from the reserves on the land. Maybe I read it wrong :-)

To: Little Engine who wrote (3924)	6/27/1998 12:57:00 AM
From: LionHeart	Read Replies (1) \| Respond to of 11684

"Book value is what they paid for the property?" I DONT THINK SO. Hey I have a 62 corvette mint, I bought it of my dad for $10,000, now I could not possibly get the book value for it ($35,000) because I only paid $10,000. Give me a break already with this thread. LH

To: Little Engine who wrote (3924)	6/29/1998 1:04:00 PM
From: Thomas C. White	Read Replies (1) \| Respond to of 11684

"Do I understand you to say that the book value of MTEI, then, would be whatever they paid for the property?" Not exactly. The "book value" would basically be the total of assets less corresponding liabilities (net shareholder equity). These assets might be cash, office building and furniture, leaseholds and property they own, and so on. The liabilities are accounts and salaries payable, short and long term debt, and so on. My only point here is that, normally, from a financial statement perspective, purchases of properties, rights or leaseholds would be shown at the purchase price of these assets, unless there's a lot of proof that the assets are worth more. Typically this cannot be done until properties are actually producing and fully delineated, that is, you have a good idea how much they're worth. Note that this has nothing to do with the "actual" value of the assets necessarily. For example, at the beginning of this year, Noble Affiliates had a book value of about $14 a share, but the price was in the mid-$30's. The market is willing to pay a premium over book based upon the "real" value of the company's assets and its prospects, as well as the market price of the assets (in this case, the premium of price/book goes up as the price of oil and gas goes up and vice versa). At the same time, prudence would tend to dictate that you pay only a "reasonable" premium over book value for stocks in the O&G biz. For this, you would look at price/book ratios for a large number of small mineral exploration companies to see what is the "going rate." Paying anything more than 4 - 5 times book value in this category is a big bet, and usually would be a case where, say, an exploration company is holding rights in an area where they were able to buy pretty cheap, and say later there's an adjacent high quality property that puts them "on trend." Meaning, it's very possible they have a big strike, based upon hard data. About the highest price/book I've seen in O&G is about 10 or so. "And since we don't know what they paid for their properties, we have no way of knowing the book value?" That's more or less correct. Absent an audited financial statement, showing assets and liabilities, you don't have any way of knowing the company's book value. So, you don't know in the case of MTEI how much of a premium over book value you're paying. As a further note, care should be taken in looking at any OTCBB mineral company's financials regarding assets. Any money spent in exploring an as yet non-producing property should be "expensed," according to SEC principles. That is, the money spent on this cannot be considered an asset. It can be capitalized (considered an asset) if it is spent on a producing property, and then is expensed as depletion (mineral asset) or depreciation (production equipment) as the resource is used up. Sometimes you see some "sleight of hand" where the company will show exploration expenses as an asset. Then, later, if there's no production, they have to write off the asset.