$25 share price, 16% FCF Yield - metrics other would die forLast quarter VET generated 98 cents a share in FCF. This is an amazing number. What this means for VET shareholders at a price of $15.15 and with essentially $4 dollars a year in annualized FCF you are getting 26.4 percent FCF even after the share price increase today. The stock has a very high FCF multiple.
This essentially means if VET put all its FCF towards share buybacks it could buyback all its stock priced at $15.15 in 3.8 years. However, the buybacks have a way of working against themselves and do increase the price and decrease the float. VET already has a reasonable float size of roughly 155 million shares.
The companies Eric talked about today on Market Call were MEG 10% FCF Yield, VRN 13% FCF Yield, but I am not away of any other company with a 26.4 %FCF Yield.
If the market felt the same way about a 10% and 13% FCF Yield as Eric Nuttall, Vermillion would be trading between 30-40 dollars a share (10%-13%) FCF yield
We invested $121 million in exploration and development (“E&D”) capital expenditures(3), resulting in free cash flow (“FCF”)(4) of $154 million ($0.98/basic share)(5), of which $59 million was returned to shareholders, including $19 million in dividends and $40 million of share buybacks, representing 45% of excess FCF ("EFCF")(4) .
Vermillion spent approximately 26% of their 154 million in FCF on share buybacks, that allowed them to repurchase 40 million dollars’ worth of shares. Each share repurchased would reduce the dividend obligation of the company by about 3.2%. Vermillion reduced their dividend obligation in Q3 by about 1.28 million dollars. Buying back 40 million dollars’ worth of shares means 2.4 million dollars is available or a 6 cent per share increase in FCF on an annualized basis.
In Croatia the gas plant has a capacity of 15 MMcf, and they just went from zero to almost 2000 boe/day of gas production there in Q3 without a lot of fanfare. The plant does have the capacity to produce 2500 boe/day of gas...
Really the value of the European Production should be a place of interest, the destination points for LNG shipments.
I think that rather than VET trading at a discount it should be trading at a premium, and clearly Europe needs and want to grow domestic gas production.
Vet should be at least 25 dollars that would still represent a FCF yield of 16%, higher than the Meg or VRN in the current market place.
VET $25 dollar price target, in my opinion.
IMHO
MHP