Long Run Explor Ltd Ord WFREF

RE:Caution

[AT1234]

You are right. I was looking at the same numbers, wondering if they are in danger of violating their debt covenants. By my estimates, it will take a prolonged period of oil being under $55 for that to happen. If oil stays low, LRE may have to dispose of some of their properties at bargain basement prices in order to reduce the debt. I understand that LRE was trying to do some dispositions but have not been able to do so yet (in this market, the buyers are probably driving a hard bargain). Still, they have time to do that since covenants are calculated on a 12-months trailing basis. It'll be at least 3Q2015 before any covenants can be triggered and more likely even later as they have 25% of their oil hedged for 2015.

LRE's enterprise value is a touch over $1B now, or about $27K/boe. That's about half of similar companies. LRE is riskier due to their high debt load. Does the risk justify 50% lower valuation? I personally doubt that. I also doubt that the dividend is much of a factor because it can be cancelled quickly (and should be cancelled or lowered to 1c in Dec, IMHO). I think the big reason for the current price is that big chunks of LRE ended up in hands of people that did not want to own it in the first place (e.g., Carlotta) and they are disposing of the shares at the end of the year. Large buyers stepped away in order to get better prices. I don't know if today's large volume day is the end of big selling or the seller(s) have more shares to dump, but suspect that we are getting close to the end of the distribution. 

JMHO and GTLA