RE: Corporate PresentationThe 2007 exit guidance of 13000-14,500 looks very conservative if we are at about 12,000 today. I think we have a good chance at $4 cash flow for 2007 depending on oil and gas prices.
$12.75 share price divided by $4 cash flow is 3.2 times cash flow. The stock is not expensive.
I think the recent weakness in the stock price is due the market repricing many energy companies to a little over 3 times cash flow like it used to be in the old days before the Trusts boom. Several of my other juniors are at 3- 3.5 times 2007 cash flow.
The price drop does not appear to be very company specific although they missed their 2006 exit guidance and should have been punished somewhat for this. If you use a multiple of 6.5 times cash flow, the stock would be at $26. So, I am convinced that the price crash is mostly the result of the market repricing many junior E & P's that were once considerd prime trust takover targets back to 3 - 4 times cash flow from 6+ times cash flow previously.
Does anyone have an opinion on what could be a catalyst for the stock top trade at 5 -6 times cash flow again? Are those days gone forever?
Regarding the Pam Orr departure: I don't see it as a negative at all. Real's debt load is a little high at about 1.3 - 1.5 times cash flow and $180 million in bank debt. When the market was red hot a year ago they should have issued long term bonds and reduced bank debt. If we have a recession and a big drop in energy prices $180 million in bank debt will present a problem. They should have refinanced this bank debt with 5-10 year bonds with no cash flow covenants.
I hope they replace her with a CFO with better relationships with the capital markets and better stategic forsight. I don't know but consider it likely that Real forced her out rather than her leaving for a better job. I never trusted a woman as CFO anyways........