GREY:CUDBF Forum Post | hiker1-18834060 | Alphaflight's reevaluation...... | Petro One Energy Corp

For those who missed this today and are getting bogged down by some of the posting on here tonite,   take a real good listen to this cause this is one sharp dude!

And as for a poster's earlier question here on "how much land they're working", I believe the J5 I heard was about 2,000 acres on its own without considering the others.........new acquistions; to be seen I guess.

Ya know, we went through alot of this same verbage and pullbacks and upticks, and back and forth on Atac right from .54 to $9.55 high of today;   worth every headache too!!

Meet my New Atac of Oil !

Petro One Energy (TSX-V: POP): My Valuation Methodology and Analysis of Market Action

A blog reader asked me earlier to explain the difference between my valuation methodology and what’s found in Petro One’s corporate presentation, so I thought my explanation might make a great blog update. I believe my numbers are quite conservative, while at the same time, presenting an extremely robust investment case for Petro One at its current price point.

Petro One’s corporate presentation follows a hyper-conservative approach which indicates a fundamental value of $1.08 / share, on a fully diluted basis.

However, their $16,900,000 USD value for the 1M BBL is so conservative it is almost silly. They have applied an 84% discount to the current price of WTI Oil.

Additionally, this figure ENTIRELY EXCLUDES the recent oil find, and prospectivity, for both the Oil and Gold assets etc.

Petro One’s super-conservative methodology mandates a massive discount to the value of their oil assets. In one sense, this is very good because it shows they are straight shooters. It seems they are trying to wow people with even the most minute aspects of the company, for example—even in terms of how conservative they are when they represent their numbers.

My calculations are more standard and give the oil a realistic value. I don’t count the hot new J5 discovery either, so my numbers, although dated, are still quite conservative.

I take 1M BBL and apply an average $90 BBL price (which is still nearly a $10 dollars discount to market) to arrive at a gross figure of $84M gross value. Next, I simply minus the highest average cost of production on per barrel basis, which is $15/BBL.

This gives me a net value for the oil assets of about $71M, at $90/BBL—without considering the new J5 Discovery.

When it comes to how I break down the Yukon numbers vs. how Petro One does it, I suppose they can be sliced and diced either way. I value them at what the current cash and GSR stock in the treasury is at current prices. Petro One’s corporate presentation includes the value of the whole Yukon deal over its lifespan. Either method is acceptable.

Petro One is seriously undervalued and they want the market to know it. When a company wants to show it is undervalued, it uses the most conservative possible methods. This way, sophisticated investors are truly impressed with the discount. When they first crafted these numbers, POP was trading in to 50-60 cent range, so it showed just how beyond undervalued the company was at that time. I expect they will soon revise their presentation to have much more robust numbers (!)

My numbers a few weeks ago suggested a FAIR market cap for the company was $86M dollars. At that time, POP had a $27M market cap, which was a 70% discount to my conservative valuation.

Now simply take my conservative $86M valuation and divide it by current shares and you get:

$86M / 47M shares out = $1.83 a share at my most reasonable, conservative valuation – weeks before this new J5 discovery (!)

If you want to keep it simple, the best way to look at it is like this:

Petro One’s numbers constitute a “beyond-rock-bottom” valuation for the stock that ENTIRELY excludes the new oil discovery, wipes away 84% of the value of their existing oil assets, and simply builds an investment case around the cash and shares it will have in the treasury from another company, GSR. The $1.08 figure they use is essentially break-up value and should be seen as nothing more than a worst-case scenario floor for the stock price.

My method gives them credit for the oil, cash and shares they have before the whiz-bang J5 Discovery. I apply conservative market prices, minus the highest average costs of production. My $86M valuation with a $1.83 share price is the conservative but fair value price.

Even by my conservative standards the stock should be bare-minimum $1.83, and if I were to give a good solid guess as to the impact of J5, I expect a fair value would range from $2.50 - $5 in the near term.

Realize it is in the nature of the nature of every good growing company to fight a see-saw stock price battle through the process of market recognition. I don’t know what the numbers will look like coming out of J5, but I expect they will be even better than first reported, which is why big industry players are weighing in. With this in mind, expect the stock to keep gapping up each morning as more sophisticated and institutional investors digest the hard data and go through the presentation and press releases.

Right now institutions and retail investors are slugging it out for a very small existing float. Consider the facts: