Value of ROE vs RECO (corrected math: thx to leblereau) To value ROE and RECO
use a factor of ~ 7 when comparing Mkt Caps. (between 6-8)
The entire lands under RECO's umbrella (Namibia nad Botswana) is about 8.5MM acres.
6.3 is in Namibia...but the Namibian govt. has a 10% carried interest.
That leaves 5.7MM to RECO.
There is 2.22MM acres in Botswana 100% RECO.
ROE can option 50% or 1.11MM acres
Round down to 1MM acres for ROE.
Add the 1.11MM acres of the 50% Botswana acreage retained by RECO and that gives RECO a total of 5.7MM (Namibia) + 1.11MM (Botswana) = 6.81MM acres to develop
Round that up to 7MM acres for RECO.
So that gives an approximate 1:7 Ratio.... ROE:RECO
Today the MKT CAP of RECO closed at $1.08 Biliion.
1/6th would value ROE at $180MM
1/7th would value ROE at $154MM
1/8th would value ROE at $135MM.
ROE closed today with a Mkt Cap of $1.224MM
- or about 80% of the 1/7th valuation.
(~ a 20% discount to the "approximate Ratio" based on land holdings alone)
I expect ROE trading to continue to pivot between the 1/6th and 1/8th valuation relative to RECO at any given time.
Bonus Potential (ROE):
The Botswana acreage (ROE/RECO - 50/50) looks to be the deepest part of the basin, and therefore potentially more valuable.
Bonus Plus Potential:
ROE has legacy potential in Mexico if Mexico ever get's it's act together.
These bonuses could eventually see ROE/RECO valuation trade closer to a 1:5 Ratio in size of Mkt Cap...barring any other exigent circumstances.