GREY:WFREF - Post by User
Post by
JohnJBondon Mar 05, 2015 12:31am
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Post# 23491787
Thoughts
ThoughtsPlenty of cash generated in Q4
Next question is how much cash will be generated in Q1
The only question that matters to me, is can LRE get through this low price stom without sinking?
There are three possible answers, yes, no or don't know.
I think the answer is yes, and this lastest look at Q4's performance supports that view.
Q1 will show lower oil/gas prices than Q4...........its unclear how much lower.
There will be very little money spent in Q2, as they're first half drilling will all be finished by the end of Q1. ie, plenty of excess cash flow in Q2 to reduce debt. in the very short term.
The reserve numbers look good, albeit mostly gas.
The latest NPV numbers, which will be based on current stip prices, and expected future production (accounting for the expected decline in 2015), give the company an equity value of about 900 million at a 10% discount rate, and about 1.5 billion at 5%. Thats a lot of equity. The banks will do their own calculation, but it will likely be similar.
What I don't like................the NGL price...............the deep NGLs they bought are apparently very low value.
Next
Step 1. The market decides LRE is not going under.
Step 2. The market assigns long term multiples to LRE's cash flow and reserves.
It will be interesting to see how the market responds. For example. Legacy got as low as $1.17 ish, then oil stopped dropping, and the price jumped to $2ish. Their financial situation didn't change, but the fear of sinking declined. It will be interesting to see if LRE's share price can do something similar once the fear of bankruptcy disappears.