Member Info for S7ein

MT Sparky,

You were valuing the company on reserves alone.

However we can add the cash, or subtract it if you prefer, given that is the method used to obtain the true enterprise value.

Therefore,

EV=MC+Total Debt-C

£240mn + £0 - £220mn

EV = £20mn

Ignoring all that and adding the cash, still has the price per barrel far greater than "12.7p"

"NS assets are now valued at 12.7p per boe in the ground of reserves."

Well that's absolute nonsense.

By your maths Rockrose should have been taken over at roughly £7.7mn.

Rockrose had 60.8m 2p "BOE" reserves.

They had roughly 55-45% oil to gas production split.

Assuming that is the reserve split (Which it likely isn't) - Rockrose had 33mn OIL 2p Reserves, meaning that a barrel in the ground has been valued at roughly £7 per barrel or $8.75 (Could be higher or could be lower dependant on split)

I've ignored 2C, therefore most likely in line with previous acquisitions.

You claim that derampers of JOG stake everything on a farm out not happening, yet post a link to a presentation providing future valuations discounted back to present day based on JOG retaining and producing 100% of their resources, while throwing out claims that the NAV of JOG TODAY is £47 based on these wildly optimistic valuations underpinned by spurious assumptions (e.g. retaining 100% ownership). To me it looks like you are the one who is banking on a farm out not happening.

Lets get this straight:

JOG's NAV TODAY is not £47. Its £1.07, based on JOG's OWN accounts. Future NAV may be £47, but it is extremely unlikley as JOG will need to raise funds through probable share dilution and debt. Not to mention that their resources are not 100% recoverable and neither will they retain 100% ownership if they do achieve a farm out.

As I said, thse numbers are spectacularly wrong, and misleading by the way, as the company tries to promote itself as a full fledged future producer.

JOG = £1.07 based on NAV.
HUR = 21p based on NAV.
HUR = 16-25p based on EV/EVIT and EV/EBITDA

Both JOG and HUR are marginally undervalued.

As of the June 2019 Interim Results:

Total Assets: £24mn
Total Liabilities: £600k

NAV = (Total Assets: £24mn - Total Liabilities: £600k)/Shares in Issue (21,829,227)

NAV = £1.07

No value allocated to resources whatsoever.

Share dilution will be required in the future.

Unsure where you are getting your NAV from, but its spectacularly wrong.

Jersey Oil and Gas are years away from producing any oil. In that time they will require additional money, which will likely result in share dilution for them, especially if they cannot farm our as they intend.

95p to buy is far too high as it stands. even accounting their "market cap", their resources are valued at nothing and their share price will be lower.

No the ratios do not apply, because you don't know the ratios. The calculations are not the same.

You need to know the split of Siccars Reserves/Resources/BOE to make a genuine comparison.

Reserves are valued higher than resources in ground.

A BOE reserve would also sell for a lower value than a BO reserve as a BOE is of a less value than than a BO, by roughly 3.5 times.

Siccar Energy do not have 600 million barrels reserves. They have over "500 million barrels of oil equivalent" in reserves and resources.

A barrel of oil equivalent is not the same as a barrel of oil, and no where near its value.

Without knowing the exact split you cant simply apply a comparative valuation.

However, based on previous transactions where the Reserves were known, Hurricane TODAY is valued at 14p. If you apply a valuation to the resources the numbers are ridiculous, but they cant be taken seriously as there is no guarantee they can be commercially extract until they are converted.

Based on their assumed 19/20 accounts, EV/EBITDA, EV/EBIT, Hurricane are valued at 16-25p
Based on 18/19 accounts, NAV = 21p
DCF valuations are about £2.90 if the company can reach their predicted 120,000 BOPD by 2025/6, but then this is based on so many assumptions I don't believe the figures.

Other tools are pretty much pointless due to Hurricane not yet reporting positive numbers, albeit it that will change this accounting period.

Analysts forecasts are usually optimistic.

David Dreaman once said that "There are no highly predictable industries in which you can count on analysts forecasts. Relying on these estimates will lead to trouble"

EV/EBIT and EV/EBITDA on assumed 2018/2019 numbers, the current day valuation for Hurricane is between 16 and 25p. NAV is 35p. Increased revenues etc will obviously push up this valuation, but Hurricane is simply not worth, or valued, at what most of these analysts claim irrespective of what may or may not be sitting in the ground. Although valuation can be placed on these based on previous takeovers, which using 2p reserves of 37mn, gives a current valuation of 11p minus anything else. 11p is therefore the bottom for the share IMO.

Some though this valuation was hilarious, because apparently the analysts are, I guess, experts and no private investor can simply use the same tools that they do.

A company buyback of "multiple million shares" would see the share price rise leaving is susceptible to the convertible bonds being converted into shares at or near their circa 50p share price. Or in other words 20-25% share dilution.

"Thanks, S7ein.
We'll let the experts know that their valuations of HUR at 100p + per share are out by a factor of 5+.
We've seen their detailed calculations - and their valuations are conservative.
I think your post is complete nonsense"

LUCKCOUNTS:
There is no need to let the "experts" know that their "future target" valuations are out of sync. Perhaps you should ask them what "todays" valuation is because based on the current price, my valuations are closer to the mark.

Based on estimated EBITDA's and EBITS in 2020/2021 alone, those "experts" valuations are a possibility. Then again, they are only using the exact same calculations that any other "non expert" has available when they know how to apply them.

I'm glad you think my post is nonsense, but the numbers dont lie.

You are trying to apply a value of tomorrow, today.

What people here constantly forget is that they are applying valuations for things that haven't even happened yet, and although a company can be valued from its future revenues pretty easily, its very difficult to apply it to a smaller company like Hurricane where they continue to post negative numbers.

For this reason I believe this company, based on estimated 2019/2020 EBITDA and EBIT market multiples, to be between 16-25p (Based on industry averages for 2019)

If the multiples are applied against averages from recent acquisitions, the numbers are broadly similar.

Whether you like it or not Hurricane, at this time, is only beginning to demonstrate its value based on actual numbers to date. Unfortunately that's a downward value.

No company in their right mind would scrap hedging policy. Oil was at just over $50 a barrel a little over a month ago. therefore when the hedge was taken out it wasn't at an "extremely low price"

Perhaps you knew the future?

The hedging also provides protection against downside. Every company hedges. They have too.

Anyway, its roughly 30 days production from Opuama alone. Hardly a bad thing.

"Gas so smoky? I am merely an office worker but to me that implies oil"

You flare Gas.

The flare implies that there is an excess of Gas, which may or may not suggest various outcomes....

https://www.exxonmobil.com.sg/en-sg/company/business-and-operations/operations/understanding-flares

"Now come on you canna get a flame source fae water so the TOL must be burning oil from the reservoir and that’s why you see a big flock off flame in the recent pictures"

Or Gas.

Shallwe:

"However, the company are brilliant, so well run compared to so many other oilers"

I agree with this, but I still believe that Eland are a growth company and the dividend, also welcome, is premature.

"There are better O&G ones out there IMHO that offer greater returns, management own more shares are safer and much cheaper"

I watch pretty much all O&G Shares, therefore I'm interested what these better shares are?

"And here I was, castigated a year ago for even daring to suggest that a dividend may be payable sometime in the future on this BB by one poster"

You were not "castigated" in the slightest

Here is what I said:

"The "dividend policy" is technically slack terminology for what the company does with its free cash flow, either:

1. Retain it and invest in new assets/projects etc, or
2. Pay out dividends or repurchase shares

I believe they will purchase a new asset before paying out any dividends, of which I still doubt they will ever do. Its in the interests of everyone that they use ever penny to reinvest in the company to increase production rapidly"

Castigated? - Hardly.

Eland get 50% of Elcrests production.

I stick by my previous post The "dividend policy" is technically slack terminology for what the company does with its free cash flow, either: 1. Retain it and invest in new assets/projects etc, or 2. Pay out dividends or repurchase shares I believe they will purchase a new asset before paying out any dividends, of which I still doubt they will ever do. Its in the interests of everyone that they use ever penny to reinvest in the company to increase production rapidly.