RE: RE: Still looking for Vecta's working interestLadies and Gents:
I sense that a goodly number of recent arrivals are momo traders rather than long-term investors (thus the inbridled oohs and aahs without any idea what the deal constitutes), but let me let you in on a secret of E&P investing. Not that many of you care since you're here only long enough to pump up the story and exit hoping to sell to someone else who knows less. In which case, I'm not speaking to you, I'm really trying to give warning to the newer investors you're trying to take advantage of in your eventual scramble through the exit door.
If you aren't the operator, you get crappy multiples on metrics that feed into your share price. If you want to understand how it affects, and you care to do the work, review cash flow and NAVPS trading multiples of top-notch operators in recognized resource plays (like Brigham Exploration, Ultra Pete, Quicksilver, for our US participants, or Peyto, Celtic, Crew, Midway, etc for our Canajun posters) vs. valuations for non-operators in similar plays (like Great Plains Exploration (prior to buyout), Trafina, Diaz, Kallisto, Vecta pre-hype, , etc). You'll find that great operators get cash flow multiples (only one valuation metric, but one of the most commonly used) between 6 and 10, depending on the vagaries of the market; whereas the same for ho-hum, non-operators tend to run in the 2.5 to 4.0 range. You'll see the same relative results with other meaningful metrics (like premiums (should it be premia??) or discounts to NAVPS - and if you don't know what either of those are, you shouldn't be here).
So, operator5 and others, you better hope this deal doesn't have them as a 25% minority partner or you can kiss goodbye their ability to raise drilling funds at non-dilutive levels. They'll just get on the treadmill and successively dilute over the next 4-5 years, all the while backstopping entrenched management with the option plan (option plans are always established as a %age of o/s shares, so if you double the shares - and cut the per share value - you end up with double the number of options) that indemnifies them against absolute losses as dilution provides capital to continue field operations.
Now, I'm not predicting that this the outcome. How the hell could I know, there's no information to make such a strong assertion (which, as you might have gathered, has been my objection all along).
And until we do know one way or t'other, All Hail to the Greater Fool Theory (which some of you are undoubtedly banking upon to motivate your more enthusiastic utterances)!
Regards,
Naamkat