Reserves firmed up.....production growth great! Volumetrically the reserves decreased by 16% but the cost per well decreased from $1.4 million to $1.2 million. So though it will take more wells, the economics appear to be only decreased by 6% so the NAV of the 2P is $1.855 billion down from $1.973. The 2P NAV per share is $7.31 down from $7.77. Thank goodness some offsets came into the equation to offset the higher F&D costs per bbl.
The F&D costs went up considerably on the 1P doubling from $11 to $21 and the 2P increased ~50% from $8.50 to $12. I am concerned somewhat about analyst reaction to recycle ratios as they were reduced from 3.7 for the 1P to just 2.
Production was extremely good in my opinion being up 4% and already very close to what Raymond James projected for the average this year at 16,978 coming in at 16,800 which is fabulous. If they continue at this quarterly sequential rate of growth this year, their average production will come in around 17850 which is just under 18,000 bbls per day. Cash flow estimates based on Brent hanging in at their around 105 average would increase to ~1.10 per share and at $110 average the cash flow would come in around $1.20
So right now, the stock is trading at seriously low multiples:
- 2013 CFPS estimate of 2.5 times and at $110 Brent, 2.28 times
- Based on revised 2P after tax NAV10% of 7.31 they are trading at a paltry 37%
The OOIP has been reduced from 7.7 to 5.4 billion bbls which really is a mute point in my mind considering the 5.4 is still unrivaled in continential Europe and is indeed a world class number.
They have had three quarters in a row of very good sequential production growth and when you couple that with management capability to decreasing brent discount to just 20% from 30% they are becoming a real cash flow generator. If they did you have a large capex allocated to infracture development (~70 million) they would have considerable free cash flow.
We will see with Mr. Market thinks. I for one am very very pleased with production and the IRR is now established at 189% per well which is very solid as they were using 90% I beleive.