TD's estimateThe TD analyst came to his $0.20 per share valuation in the following manner.
50% of Net Asset Value per fully diluted share = 0.5 * 0.38 = $0.19, rounded to $0.20.
Based upon 430 million fully diluted shares, the details of the calculation are as follows:
Project values
- Mackay Phase 1 = $425 million (131 mmBOE at $3.23 = 425).
- Senlac = $125 million (15 mmBOE at $8.53 = 125).
- Remaining 2C Resource = $127 million (510 mmBOE at $0.25 = 127).
Total property value of STP = $677 million/430 million fully diluted shares = $1.58 per share.
From this subtract $513 million of net debt (580 million long term debt less $66 million working capital surplus)
Net Asset Value = $677 million – $513 million = $164 million
NAV/share = $164 million/ 430 million fully diluted shares = $0.38 per share.
It seems to me that $125 million is a reasonable valuation for Senlac (given previous posted estimations). I presume that $0.25 per bbl for undeveloped reserves is reasonable as well. However, I would think that McKay is worth more than $425 million ($3.23 per mmBOE).
We should note that there is approximately $513 million/430 = $1.19 in net debt per share. The common shareholders owe a large amount. Hopefully common shareholders can continue to refinance debt as profitability improves.
In the immediate future, happiness will be a positive cash flow. That should occur as volume increases. TD has average BOE/d of 4,371 for fiscal 2014 (ends June 30, 2014). Given that the first half of fiscal 2014 was 4,457 BOE/d, the TD’s estimate for fiscal 2014 may be a tad low. TD’s estimate for fiscal 2015 is 7,424 BOE/d.
It would be worthwhile if some of us tried to estimate BOE/d for the next few quarters when ICDs are introduced.