RE: That's enough for me! I think everyone should be doing this analysis, but the specific numbers you use in the analysis make a big difference in the valuation you come up with. First of all, 4000 boe/d * $35/boe * 365 days = $51 million, not $40 million.
Second, oil prices are higher now than we saw in Q2. Last year, the average price Arcan received was $10 higher per BOE than in Q2 this year. Also, if they are reducing capex, G&A should go down as well. I think with the current oil price strip, $42-45 / barrel corporate netback is quite possible. So more like $60-$65 million per year cashflow at 4000 boe/d. I think they could keep production constant a that level with about $20-25 million per year of capex.
By my calcs, debt is $320 million minus $7 million from land sale minus $16 million from acid supply contract cancellation. So $300 million net. They have 4 years to pay down 85 million of that, and then another 2 years to pay the second 85 million. Cash flow goes up by 5 million per year as they pay off each set of notes. Each $1 increase in oil prices gives them $1.5 million more in cash flow at 4000 boe/d. I think things are manageable at current futures pricing.
As for CPG not buying them yet, give it time. They need to first come to an agreement with management and second come to a price that everyone will be OK with. They didn't buy REL at 20 cents last fall when they were stuggling after a wet drilling season; they let the share price recover to 30 cents, then bought them at 35 cents. A decent premium, but not so much that it looked like they overpaid. I think $2.75 would be the equivalent price for Arcan.
I don't think the revolver is at serious risk of being lowered unless oil prices fall, since the borrowing base was confirmed at $200 million when oil prices were lower than they are today.
It doesn't matter at what price you originally got into the stock; the only question you should ask yourself is: it it a good value at the current price?