What is VST worth?Repost for newer investors:
Formula to estimate NAV for VST:
Oil in groung estimate X Recovery Factor X 37% = VST's share of Recovered oil
But how much is that worth? Well, according to Scotia Capital analysist Gavin Wylie , 148MM barrels of recovered oil is worth $15.96 a share to NIKO. That is his analysis from September 2009 on Niko. Since Niko has 50 Million shares, that means that 148MM Barrels is worth $798,000,000.00. (50,000,000 X $15.96= $798,000,000.00)
That actually comes out to $5.39 per barrel. ($798,000,000 / 148,000,000 = $5.39)
Anyways,lets dothe math for now much 148MM Barrels is worth to VST. It's very simple,just divide 798,000,000 by 270,000,000 ... and you get $2.95 per share for every 148MM barrels of recovered oil.
To make things simple,lets just calculate how much per share we are worth per 100MM barrels -100/148 x 2.95 = $1.99 per share for VST per 100MM barrels of oil.
Of coursethe big question is how much oil is down there and what's the recoveryrate. This is where you get to plug in the numbers with the formulaabove ...
As an example, if oil in ground is 2.5 billion barrelsand the recovery rate is 50% and our share is 37%(2,500,000,000 x .5x.37) then our NET share of this oil is 462,500,000 barrels. Asestablished earlier, every 100MM barrels is worth $1.99 per share toVST, so just multiply 1.99 x 4.625 and VST NAV should be $9.20 pershare.
So it looks like we will need about 2.7 BILLION barrelsof recovered oil for Vasts share price to go to $20.(2,700,000,000 X.37= 999,000,000 barrels for VST . $1.99 X 9.99 =$19.88)
That's do-ableif we hit 4.5 Billion barrels with a 60% recovery rate... and a 60%recovery rate is just about what Heritage is looking at for Miran:
- Miran West structure estimated oil-in-place of between 2.3 to 4.2 billion barrels
- Recovery factor expected to be between 50% to 70% due to the highly fractured nature of the reservoirs
The published estimated recovery rate for VST is 16.5%. This IMO is ridiculously low.
There isa poster here who will try to persuade you that this stock is worth 17cents per share and that this stock is very expensive at thecurrent price. Technically he is right but this is a VENTUREstock (speculative) and has the possibility to go much higher. Theyare drilling in KURDISTAN ... not Oregon! There's TONS of oil inKurdistan... billions and BILLIONS of barrels.
The current slump in VST share price is a reflection of overall market jitters. The Dow, TSX and TSX.V are all WAY down since the beginning of the month. Also their neighbor WZR has had problems drilling which has affected VST S/P. As the markets rebound (hopefully they are doing that as we speak), and as VST approaches their first target (at 800 meters), we will undoubtedly see an appreciation of the S/P.
There's been a lot of discussion about what 2P oil is worth. One poster says it's 4.00 per barrel and another says it 14.00 per barrel. Does it really matter at this point? 2P is described as "proven plus probable". VST has nothing "proven", only "probable". 3P on the other hand is "proven plus probable plus possible". This is where VST is sitting right now. Nothing proven, only probable and possible. So how can we assess the current share price? We can't. There is nothing proven, but there is probably hundreds of millions of barrels of oil and possibly billions of barrels of recoverable oil.
This stock is a gamble. Pure and simple. We are gambling that they hit a massive reserve of oil. But the odds of hitting the motherlode are pretty good. Not guaranteed, but pretty damned good.