OTCPK:WSRLF - Post by User
Comment by
canadafoxon Mar 10, 2014 3:04pm
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Post# 22304035
RE:RE:RE:RE:RE:RE:March-April a turning point for WZR
RE:RE:RE:RE:RE:RE:March-April a turning point for WZRTP; Again, thanks for the effort and here are my comments...
It is misleading IMO to state 'annual' and 'per year' relative to earnings The reason for this is that if your revised initial $$pb figures are accepted ( they are similar but slightly lower than my own ) then at 15K bbls/day ( hopefully ) there would only be 2 - 3 years of such revenue before current accumulated costs were effectively repaid. There is approx. $150m - $200m of costs to be recovered under the Garmian PSC. The revenue pb soon asymtotically and quickly approaches the base Profit Oil %. This is nominally ( non-DCF ) around $5.50 pb by my calculation. It is very easy for investors to assume that a $20 pb return should be the basis for valuation if they accept assurances of 'annual run-rate'. On the figres given it will over-inflate company value by a factor of 400% or so.
I divorce the cash-flow implications of cost recovery ( short-term ) from the overall resource NAV. If an investor believes that his/her return is going to reflect a buyer's analysis of the NAV then it is this second figure that is important. This is largely influenced by the plateau Profit Oil pb $$ figure ( $5.50pb non-DCF ) and not that derived from the cost recovery phase.
The initial run-rate is of course very important in WZR's case because we are cash-strapped. Like any business WZR can go under or be eviscerated by a lack of cash even though they have a highly valuable asset(s). I am not ignoring your initial run-rate figures at all for this reason.
It is also the case that all cash earnings will be spent on development for the foreseeable future. This is especially the case if WZR have a strategy to be a major producer and not be acquired. No matter; in the latter a buyer is interested in the asset's value and in the former it turns into a dividend machine. The market will value WZR in either case on the long-term asset value and that depends on the base PO % return. IMO.