HYDRA Capitol Partners on VLE Valeura Energy (VLE.TO, last at $3.78)
On an EV/CF basis, VLE remains as one of the cheapest international names that I follow. The market continues to have a hard time believing that VLE is as cheap as it looks, but the company’s recent reserves report shows that the initial premise of field-life extension through near-field/infield drilling and reserves growth seems to be holding up. Some folks don’t like the fact that VLE’s PDP NPV is negative, but the 1P and 2P reserves look healthy enough. One thing that I don’t know yet is how much future development capital is assumed for the 1P and 2P reserves cases, so I’ll keep an eye out for that when the reserves report is filed. What I do know is that the acquired assets have already allowed VLE to fully pay off its debt and accumulate US$150 million in cash as of the end of 2023. Not too shabby. VLE pegs its YE2023 2P after-tax NPV10 at around C$7.50 per share and the stock trades at about half of that price, which seems reasonable in the context of the sector valuations. VLE is the poster child for the kind of equity value creation that can happen when the right asset finds the right home, and I think of it often when I think about my TNZ position — especially when I consider that TNZ has roughly one-quarter the number of outstanding shares, giving it even more per-share torque.