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Thursday, March 19, 2009
GOOD POST - ADVFN - ZENGAS's take on valuation
ZENGAS - 19 Mar'09 - 00:44 - 24525 of 24671
With BLVN and Venture both in the news -
I've had a look over Venture Production.
Currently £7.34/share x 149.8m shares = m/cap of £1.1 billion.They also have £465m in loan notes/bonds on top of that.
That puts the total value at approx £1.565 billion pounds.They have £200m in cash.
Production was 45,000 boepd (predominantly gas).
Net 2P reserves at Dec 31st 2008 = 214 mmboe.
Revenues for 2008 were £495m (this was also helped by high oil prices at the time which have since dropped by 50% minimum).=========================
Over to you Leeson - Whats Afren truly worth on 27,900 boepd for the moment ?.This is generating circa $1m/day or equal to about 50% of Ventures 2008 revenue (and we are at a lower oil/gas price than Venture had for 2008). In fact Afrens revenues are about equal to Venture at the moment due to Afren having a bigger oil production segment anyway.
Using 80 mmboe P2 - not far off 50% of Ventures reserve figure.Afren have a bigger oil reserve to Ventures being mainly gas.
Afren debt circa £275m incl loan notes (correct me anywhere you think i may be out) which is again almost half of Ventures debt). 447m shares X 26p/share currently = £116m.
That puts the value of Afren at just £391m and theyt still are supposed to have a substantial lump of cash (Leeson - cash perhaps £30m+ ?)
On those parameters you have Venture at £1.565b (with £200m cash)Half Venture (to mirror Afren assets/production) leaves £780m less £200m cash = £580m equivalent value that i would expect Afren to be decently valued at.
Afren = £391m less £30m cash = £361m.
Afren should make up at least another 25p/share to give a valuation at £470m (+cash).After all, this is a company with the same revenue stream as Venture when you study it. Venture list their average sales price for 2008 as £33.58/boe (around $60/boe and this will have dropped).
My opinion is Afren should be trending to 70p to have a valuation on a par to just 50% of Venture.
At the least - 50p share should be a very short term fair value and still be way undervalued to what Venture is presently worth at half Ventures current valuation - so in my opinion there is still a lot of mileage in Afrens share price in the very short term as evidenced by the strong buying/days high close. It's simply too cheap and oversold. That's still too low imo because any buyer would see the income stream and debt reduction. It also should be seen that an outright bid for Venture may be 30% higher than todays valuation.
Afren are also sitting on sizeable contingent reserves but more importantly have already a very recently announced partnership with Sojitz the $27b investment conglomerate with annual trading transactions of $55b. This has been underestimated while the focus has been on other things - ie the state of the markets etc and not the real value of the company and what they are about.
The purpose of the Sojitz alliance will see Sojitz invest $500m in securing new assets of material size !!! IMO Conglomerates of this size don't make assets of $500m available to companies like Afren without knowing their true worth.
In the short term Afren should be announcing news on Ebok which if positive would substantially change the above valuation again.
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