My thoughts on valuationI'm currently valuing the company as follows:
1. PNG (Drilling + PIMS):
Currently, the one rig that's running should proivde around $12MM in FCF per annum. Within a year (year and a half max), we expect all of the three rigs to be fully operational; with three rigs fully operational we're looking at $36MM/annum (this is conservative as rigs 115/116 are High Arctic owned rigs). Consequently, valuing the business as 4x FCF = $144MM.
Note that with one rig only, the valuation of 4x is roughtly $48MM.
2. Canadian Assets:
(a) Team Snubbing: $11 MM ($8MM equity and $3MM note). We're looking at around $1.5-$2MM in revs per annum from our equity stake. Nonetheless, let's value it at cost.
(b) Net cash - $42.6MM
(c) LAND - $6MM (don't forget that net cash removes the mortgage of $4MM). Lance mentioned a roughly 75% leverage ratio.
(d) HAES Rentals Business + equipment - $10MM (This is off-the-cuff) based on $2.5MM per annum of FCF generated via its 50-60% margins.
3. US Assets:
Colorado assets: $3MM. They paid $9.4MM when they bought the assets from Powerstroke in 2018. Not that cost basis matters but nonetheless $3MM valuation.
ref: https://www.jwnenergy.com/article/2018/8/21/high-arctic-expands-us-acquisition-powerstroke-wel/
SUMMARY:
In summary, adding up the pieces we get: 144 + 11 + 42.6 + 6 + 10 + 3 = $216.6MM / 48.8MM s/o = $4.45/sh.
Looking at today, let's consider only the 1 rig and not the potential of 3 rigs. We then have 48 + 11 + 42.6 + 6 + 10 + 3 = $2.48/sh.
So, the question is how much of a premium will any offerer assign to what we expect will happen over the next year and a half? Avalon suggests a 20% premium (i.e. $3.00/sh). I, on the other hand, would accept at least 40% or $3.50/sh now and $5.00/sh in a year and a half's time. To be honest, I'd rather wait until all three rigs are up and running in PNG before any "sell" decision is made. Wishful thinking on my part; let's see what happens!
Cheers,
JJ