RE: RE: House positions for Today Thanks LJ and I am happy to provide a new view on this play.
First of all, let me say that although I like the stock market and have done well for myself over the years, I have never been involved to this extent in an oil play. So my comments are more based on TA and a crude understanding of the company's fundamentals.
I believe this play is suffering from huge shareholder fatigue at the worst possible time. You guys have lived through so many dissapointments and many have lost faith and money along the way I am sure. We are now on the cusp of the main reason (besides ED) why many fell in love with this stock but too many here have been burned before and are now gun shy about buying more shares at these cheap prices. If this was a brand new play and the company was promoting it properly, we should be somewhere between
.85 and $1.50 in my opinion, even in this awful market.
Tomorrow will answer a big question: Is the PRE PP accepted by the shareholders. We all assume that it will and it should. However, playing devil's advocate, what if PRE plays dirty and has enough players to get the vote to say no! The company now has 32 days to find $30M or lose their offshore license!! That is a real risk but I do not believe that it will happen. However, once that risk is removed aka the PP is approved (and the options are given out at 55 cents to our dear BoD and management), then I see no reason why our share price does not go to 85 cents minimum and this may happen faster than most here think.
Let's go thru the numbers one more time here to again demonstrate the upside potential here.
300M barrels at $4 gives us $1.2B in MC or $2.54 per share on a share float of 472M. That is the value that the company gets for proven assets if Jaguar hits. Now, we saw what happened to the share price when Zaedyus hit. That was a pure derisking effect based on a hit over 500 NM away. Now, we would have a hit in our own backyard. What will this do in derisking ED? Possibly a third Turonian target besides ED? Our other targets?
Let's look at ED alone for a second: Let's assume we get a second JV with the same terms as PRE which is being generous from our perspective if it is done after Jaguar"s positive results. We get 34% of 2.5B barrels with no cost to us so no dilution. That would be a potential 850M barrels. Give that a P25 to be conservative (always assuming Jaguar roars) and we get a value of 850*0.25*$4 or $1.80 per share for a total value of $4.34. So if we give a value of ZERO to the rest of our prospects and only include our share of Jaguar at $4 per barrel and a 25% chance of getting 34% of ED, we have a fair value of $4.34 per share very conservatively IMO. From 54 cents, that is an 800% ROI!!! That means that the market is giving us only a 12.5% chance of being successful at Jaguar. I think our chances are about 4 times that and why we should be much higher in our share price than we are right now.
Now, for those who like to have fun, let's say we finance the other 50% of ED and we hit there...based on the same parameters as earlier, we would have a minimum share price of $13.40 per share based on dilution giving a total share float of 500M shares. From our current SP, that would be a 2450% ROI. How, the market is not excited by the possibilities here is difficult for me to understand. Yes there are risk but what projects around the world give you a legitimate shot at those possible returns??
Looking at the AOI model, it was solid proof that there is no shortage of investment capital once a discovery is made. If we hit, the best thing everyone here can do is take a 2 week holiday and not even look at the share price. Being over zealous to take profits here will cost you large IMO. If we open under $3 after a roaring success at Jaguar, I would not be scared to go all in and ride this horse for a few weeks!
The other side of the coin is if Jaguar misses, we are probably 15 cents, a 72% haircut in our share price. So make sure that after July 15th, any money you have in this stock is play money because things will go either way in a heartbeat!
Good luck to all!
Glorieux