GREY:WFREF - Post by User
Comment by
wilwalon Aug 09, 2015 11:39am
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Post# 24001276
RE:wilwal says lre os worth $4...LOL
RE:wilwal says lre os worth $4...LOLUsing metrics based on $90-110 oil, $4-6 is a good number. Anyone who looks forward to oil prices returning to that level can use valuation metrics which will come out in that range.
The problem is that oil will never return to that level. $70 is the new high end of the range except for temporary supply disruptions or if OPEC gets back into the game of trying to manage oil supplies. At those levels, LRE comes out with a much smaller evaluation, and with prolonged prices at $40, survival becomes a issue.
LRE suffers a discount right now because of debt problems. Solve the debt problems and the company will get a boost. You can see what the market did with the latest NR until they found out that the financing was not secured. If your thesis is that oil prices will recover and that management will be successful in mitigating the debt problem, then averaging down is the only way for current investors with $4-5 costs to get out of the trap. With my current outlook on oil prices for the next 5 years, LRE is not likely rise above $2, at least in the next couple of years.