Freddie, DCF model and historical analysis etcGood afternoon Freddie, you can get into a DCF model...link below if interested fairly straight forward. I have my own analysis but also look at relative value versus historical. I know some say history doesn't repeat and others say history does repeat. While I don't get caught up on the values (as I don't set a target of what my expectation is I stick with target dates of operational execution) I still absolutely review where we are on a high level valuation basis.
This is a simple chart comparing the days of high oil versus today. I will highlight some key points.
1. The company has been focused on debt. They have come a long way from the $2b+ debt...if you look from a historical perspective hey should hit $800m this year at strip (that said production is way above what it used to be) bottom line debt is a non-issue
2. The company is now focused on share count. You will see the shares (various deals to acquire assets jumped) by a factor of 4.75. Again picked up assets BUT the company is bang on to use FCF to reduce debt and eliminate shorts, and smaller retail players while getting to a lower float.
So now I get to the basis of my adjusted prce
1. Since the float count jumped 4.75x you really need to divide that historical price by 4.75x
2. However production is up 54% so I than take that number and gross up by 1.54 (even though yes the company is far more efficient from a BOE persepective I will ignore that upside)
3. Of course not only is WTI higher than those yearly averages the CAD$ is much stronger which helps us (back than CAD$ was near par to the USD$) this adds a WTI/FX factor
So you can see where the current price of 118.38 drive my analysis but also where I have it for $85 and $100
Now I believe Eric has $14 for $100 versus my $19.64 however he is also using a lower than historical multiple and being conservative (setting the expectation for his holders) which I agree with.
Again it is just data and a VERY simplistic view. Things are FAR more complex and Clearwater adds significant upside on FCF and profitability (versus the old days)
So it really comes back to get the debt into historical allignment (this year at these prices) and eliminate shorts and smaller retail holders who like to flip and trade in/out.
Of course just my opinion and no recommendations just simply taking old data and comparing to current data,
Many use DCAF....here is a standard model (just need to forecast what you think cash flow will be go forward (many of the charts Eric uses is cash flow model)
https://www.wallstreetprep.com/knowledge/dcf-model-training-6-steps-building-dcf-model-excel/