Seeking Alpha article - sell RRX buy NVS, nothing newhttps://seekingalpha.com/article/1561302-go-long-novus-energy-short-raging-river?source=google_news
A similar comparison was posted earlier, by probably the same person. You need to register to read the full article.
Here are the concluding paragraphs:
Side by side the difference in valuation between these two companies is very large.
|
|
Raging
|
Novus
|
|
|
River
|
Energy
|
|
Per Flowing Barrel
|
$158,333
|
$54,100
|
|
Multiple of Cash Flow
|
9.5
|
3.68
|
|
Per Proved and Probable Reserves
|
$44.44
|
$9.38
|
|
Debt To Cash Flow
|
0.36
|
1.38
|
Raging River is valued at three times what Novus Energy is.
Keep in mind that these two companies are operating almost beside each other in the Viking play in Saskatchewan. There are the same assets being valued very differently.
The one obvious thing that Raging River has that is more attractive than Novus is a very clean balance sheet. That should command a better valuation, but realistically Novus at 1.38 times debt to cash flow is not highly leveraged.
Conclusion:
On a production, reserve and cash flow basis these companies are almost identical. On a valuation basis, all three metrics show Raging River to be valued at three times of what Novus is.
Raging River appears to be more than fairly valued. Novus Energy appears to be extremely inexpensive.
I think going long Novus and short Raging River might be a good idea.
The one logical outcome of this valuation disconnect is Raging River using its richly valued equity to acquire Novus Energy. Given the similar assets and the fact that Novus is looking into a "value realization" process that is a result that wouldn't surprise many people.