SE Saskatchewan value (+ total value)From RBC (December 23rd)
• Metrics and deal flow: Since 2012, the Montney, Viking, and Cardium rank as the most actively
traded assets, with 57 transactions totalling 225,000 boe/d of production sold. Over that time, average
transaction metrics are highest for the Viking ($95,000 per flowing boe/d) and SE SK ($115,000 per
flowing boe/d) assets, which makes sense to us given their relatively low capital costs, favorable
royalty rates, and light oil-weightings, leading to quick payouts and strong half cycle returns.
-----------
Longview is currently producing 2100 barrels from SE Saskatchewan, using RBC’s average transaction value in 2013 for assets in the area, we get a value of $241.5m or 71% of our current enterprise value ($226m market cap + $115m debt = 341m) for this asset alone. This means at the current valuation, the remaining assets 580 Bpd of heavy oil at Lloydminster, and 3300 Bpd (63% NGLs/medium/light oil) in Alberta are worth merely $100m or $25.7K per barrel!.
Applying a more proper valuation range for the ex-Se Saskatchewan asset of $45K for NGLs, $50K for heavy oil, $85K to medium/light oil and $20K for NG we get the following value:
NG: 1200 bpd x $20K = $24m
NGLs: 500 bpd x $45K = $22.5m
Heavy: 580 bpd x $50K = $29m
Medium/Light: 1600 x $85K = $138.5m
Total: $211.5m
Adding SE Saskatchewan at $241m give us $452.5m, minus $115m in debt give us: $337.5m or $7.18 per share.
No matter how the numbers are spun, we always end up with a valuation in the $7 range, and this is based on the current 6000 barrels in production. A year from now with 12% increase in oil production (6% total increase in volume) we could be looking at a valuation approaching $8 despite 48c in dividends to be distributed in the meantime.
Regards,
Nawar