share price There is no doubt, that for most juniors, 2012 since about mid-January has been rather soft after a nice little run in late 2011. As a junior, EE's price is somewhat determined by what its peers are doing.
In my view, EE's share value seems to best reflect its current level of production. I have a few juniors where the price, to a great extent, is determined by their anticipated success rather than their current production. For these companies, value attributed to land, drilling inventory and probable reserves seem to form a large component of their current share price. EE's share price determinant seems more geared to current production. So, 2000 bopd X 75,000 per flowing barrel day, less debt ends up at about $1.90 per share. Do it at 2500 or 3000 and you get numbers like $2.50 and $3.10. Of course, you can all use your own data as to how much you feel a barrel per day is worth.
So, as shareholders, we should continually look for production increases. And as EE has taken the time to explain on their presentation - this is very risky to extrapolate on a quarter by quarter basis. The reason is their method of producing maximum cash flow ( which we all want) from new production, which entails that the newer wells must be shut-in for some period.
Hence, lets look at this wonderful new well that tested 777 BOPD. When it first goes onstream, production will jump from say 2000 to 2777 BOPD and stay there for a few quarters. Then, it gets shut in, and the next quarter production falls to say 1925 BOPD ( the old 2000 base being depleted). And everyone panics.....and the sp falls out of bed.
EE is a straight oil play. Its wells are comparatively cheap. The seimic seems capable of picking winners and we have a large land spread. This is all very good. Unlike some of these very expensive oily-gas horizontals, the production of EE wells doesn't drop off a cliff after 6 months becasue of depletion - its because we shut them in for awhile !
EE has lots of risks also......and like any junior, it will be a bumpy ride. But, many think it will be a good ride.