Long Run Explor Ltd Ord WFREF

RE:RE:RE:RE:Why Invest in LRE!

[wilwal]

You are correct Shlinker.  This company sits in a precarious position with high debt risk and their current plan doesn't cut the mustard with shareholders, hence the valuation.  

Management didn't see what shale was doing to oil and we aren't sure if they yet understand that oil markets have changed forever. Most of their blunders can be to this hubris that $100 oil was here to stay (and they weren't the only ones in the oil patch like that).  Lots of oil managements thought the party would last forever.  However, this isn't just another ho-hum cycle that we have seen many times.  The idea of "peak oil" has been obliterated because there are enough shale basins all over the world to provide $75 or less oil for the next century or more.  

This company has to get ready for the new order, and show investors that they can survive at $40 oil and prosper at $70 oil.

I'm a new investor to LRE and my thesis is that they will learn and do what is necessary.  If they don't, I have made a mistake and we will see .50 this year.

You are also right about at least one valuation metric Shlinker.  The NAV on this company is $1.35-1.40/share. A takeover is unlikely to occur at $1.50 at the moment.  Nobody wants to hear that but the NAV is a fact.  Valuation of oil flows gets it up to $3.50/share but that simply isn't going to happen until they get their heads out of the sand and make a dramatic move against debt.  They have to realize that they cannot be a "growth company" anymore until they can start making cash flow at $60 oil and big profits at $70.  That means more than just dealing with debt, but they have to reorient the company into the new paradigm of lower operating and admin costs by getting smart with operations and tough with suppliers so that cash squirts out at the bottom line.

I'm enthusiastic about this company at these price levels because they can fix things and there is lots of upside potential.  There is money floating around out there to buy assets to allow LRE to get back on a secure footing and as longs, let's hope they go after it and get a good price for some assets.  I think they know what they have to do so let's see if they can execute it.