GREY:DPGYF - Post by User
Comment by
zagorskon May 30, 2007 5:51pm
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Post# 12866162
RE: Re: dee share price.....ascend
RE: Re: dee share price.....ascend
I only get the market cap of DEE to be 130M ( 68x1.90 )
The market caps of VRO,RRZ and CYS have to be looked at closely since they have all had recent acquisitions and/or share issues.
Certainly on a price to book basis DEE is a bargain. The same metrics hold true on a net asset value basis. Does this indicate that DEE is a possible triple?
As you mentioned it is the quality of the lands that determine how much gas will be found. VRO, RRZ and CYS have large drilling programs and maybe this is why the analysts and institutions allow them such a high share price. The downside for a stumble can be quite severe since expectations are high. Basically I am at a loss to explain why these companies have such a high relative share price.
I bought DEE for two main reasons:
1. It is undervalued based on the many traditional parameters. ie. price/book, 10%NAV, price/cash flow etc.
2. I like the play at Bigfoot in the Jean-Marie trend. It is in a gas prone area where the payoff is quite large for hitting a good well. DEE paid a big upfront price to get in on this play so management must think the chances are good here. DEE has put over $60M in infrastructure costs and this investment is valued as zero in terms of its stock price. I believe this is a hidden value. DEE has many years of drilling locations ahead of it at Bigfoot and each successful well will mean you should continue to hold the stock because more successes will follow.
Additional reasons to like DEE are insider buying on the open market, strong price support at $1.85 to $1.90 and the possibility of a short term boost from the drilling going on at Tower Creek.
A shorter term negative for DEE is that Bigfoot can only be drilled in the winter and since gas pipelines are full it is not easy to get additional production on line. Drilling will be modest at Bigfoot until demand is there for increased production. You may have to sit on this one for a long while. This is probably the reason the stock is priced so cheaply.